Next question: Who exactly will get hit from the big move?
John Hodulik, media analyst for UBS, expects advertising revenues will grow slowly at Netflix -- with ad revenues for the U.S. and Canada expected to hit $2 billion in 2025.
Hodulik did not reveal more specific details about where exactly those ad revenues would come from. But we can assume persistent general erosion of national TV platforms -- live, linear TV platforms in particular -- will mean cable TV networks are likely to get hit.
At the same time, Disney+ is also starting up its ad-supported service, is likely to be competitive as well. And you might again wondering how much self-erosion will be at its live, linear TV networks -- broadcast and cable.
We already see where dollars are moving from -- and to -- streamers. NBCUniversal's Peacock noted earlier this year it pulled in $1 billion in upfront advertising revenue commitments. How much of this was intended for the NBCUniversal-owned TV networks?
Drill down into this. We know that Netflix, for example, currently has very limited ad avails for marketers to buy -- on a limited number of TV series and movies. On the other side, Peacock and Paramount+ hourly ad loads are currently more comparable to on linear TV network schedules.
These streaming platforms are likely to cause quicker erosion -- including some of parent owned live linear TV networks.
In two years, UBS estimates for Netflix at $2 billion would roughly result in a national TV share of 5% -- assuming around $40 billion in advertising spend on national TV (linear and streaming) per year currently.
Hodulik estimates advertising revenue from Netflix ad-supported subscribers will yield an average revenue per user of around $3 initially. Still overall advertising revenues will result -- at least initially -- on Netflix's overall revenue.
For the second quarter of this year, the top five network-based media owners -- in terms of overall market share -- went this way: Warner Bros. Discovery (21%), Walt Disney (19%), Comcast Corp. (18%), Paramount Global (16%), and Fox Corp. (5%).
So figured from this list -- again roughly -- where new streaming platforms will tap into eroding live linear TV services.
Tracking exact advertising-revenue movements into Netflix will be harder.
Wayne, there has been considerable speculation about who Netflix's new AVOD service will compete with for ad revenues. I doubt that more than a few national TV time buyers are going to pay three times more per viewer to reach small audiences via Netflix when many cable channels reach as many or more at a third the CPM, so capturing ad revenues from cable may not be as easy as some think.
Obviously the most likely target will be the broadcast TV network's prime time and late night ad dollars as here the CPM difference is substantially less.But there are only so many broadcast network prime time and late night ad dollars at play---perhaps $10 billion per year---and Netflix isn't the only one chasing them. Which means that it is going to have to rely on other sources-----like CTV/ AVOD or digital video ---if it hopes to maximize its haul of national ad dollars---plus local marketers, direct response types and search advertisers---all of whom have special approaches in their use of TV and need to be catered to differently.
I think that attaining an annual ad revenue of about $3-4 billion is a reasonable goal for Netflix---providing it can muster 30 million U.S. subs and becomes more advertiser -friendly---but it aint going to be easy.