• by Wayne Friedman , Staff Writer, October 6, 2023

Not even a year into its decision to start up an ad-supported option of its longtime ad-free premium streaming service, Netflix's decision to change its most senior advertising sales executives has some veteran media agency execs scratching their heads.

On Thursday, Netflix announced that Jeremi Gorman would be leaving the company to be replaced by Amy Reinhard, who had been vice president of studio operations for the company. 

“I was pretty shocked to be honest,” said one veteran agency executive about the move when contacted by TV Watch.

Netflix started up its ad-supported efforts in November 2022 after many years of telling analysts and the press it had no desire to move into the business.

Initially, it seemed, according to analysts, that Netflix couldn't get a handle on how much inventory it would have to sell -- all due to Netflix renegotiating content deals with producers to now include advertising messaging in those programs. To a great extent, these issues have been resolved.

But other issues remain. Initially, pricing for Netflix came in at a sky-high price of $65 CPM -- the cost per thousand viewers. But a weakening scatter market pushes down that pricing. By July, it had brought down the prices to around $45 to $55 CPMs.

There was also an issue around overall growth of the ad-supported option by subscribers. “It has been a tough sell and the scale just isn’t there,' another executive told TV Watch.

In August, after 10 months of its ad-supported operation, Netflix had only amassed 10 million global ad-supported subscribers, according to reports. Again, some of this was anticipated.

Still, senior Netflix executives had concerns. In September, Spencer Neumann, chief financial officer of Netflix, said about the ad supported efforts: “We’re still in the crawl, walk, run stage. So it is not easy to build an ad business from scratch. We've got a lot of work to do.”

At just about the same time as the Netflix ad launch, Disney also started up its advertising-supported option for its Disney+ service. 

The big difference, of course, is that Disney has had a world-class advertising operation in place for decades for its TV and video platforms and long-term established partnerships and deals with major TV advertising brands.

Although Netflix as the streaming service has been dominant with CTV subscribers and viewers for years -- easily outperforming new upstarts -- starting from scratch in advertising was alway going to mean heavy lifting.

The good news is that it is profitable where the vast majority of new competitors are not. But now, Netflix finds itself in the same boat as legacy TV networks who have young streaming services -- subjected to a weak TV/video advertising market that still needs to see improvement.

Welcome to the club.