Let’s Drop the News
Y’all, it’s happening! Netflix is introducing commercials to its streaming platform.
Now, take a second to collect yourself and not get too riled up. And please, don’t shoot the messenger. Let’s dissect what is really happening.
On June 21, Netflix co-CEO, Ted Sarandos, confirmed that the company will begin testing an ad-supported subscription tier that will boast a lower price point than its standard non-ad tier. The company is currently holding discussions with a multitude of potential partners in order to help ease itself into the daunting space that is the ad world; reportedly, the list includes Comcast, NBC Universal and Google. This is the company’s most dramatic pivot since its shift from DVD-by-mail to streaming.
See? At least you’ll be able to save money with your Netflix subscription – that is, if you’re willing to sit through some ads (and we highly recommend that you sit through some ads…our livelihood depends on it). As of right now, it is rumored that the price point will be less than $9.99, AKA the company’s cheapest offering.
Catalyst for the Ad-Supported Tier
So, why is this change coming about? Why now? Well, Sarandos’ news comes in the midst of what has been a rough year for Netflix. It comes with no surprise that the competition among entertainment services has only grown fiercer, as evidenced in the streaming mogul’s net loss of 200,000 subscribers in its first quarter of 2022. Additionally, the backlash that the company received after announcing that it will implement more stringent policies in regard to password sharing contributed to this decision, as well as the approximate two percent decrease in employees that the company witnessed as a result of layoffs.
Moreover, the company’s stock price has plunged more than 70% this year, erasing roughly $70 billion of its market capitalization. This has even prompted shareholders to file a lawsuit alleging that Netflix has deceived investors about their diminishing subscriber growth. The company also wants to stay consistent with its “binging model,” which is when episodes of a show are released all at once. However, Netflix has begun to release episodes for its more high-profile shows through an intermittent model, as witnessed by the latest Stranger Things installment. Some analysts believe that this practice prevents people from canceling their subscriptions prematurely or moving in and out of them.
Therefore, as you would expect, Netflix hopes to generate more revenue with this new tactic. There is no official timeline for these changes; however, this cheaper tier is expected to be implemented by the end of 2022. Netflix now needs to find a balance between its new tactics for revenue and the core characteristics that make the platform so appealing to audiences.
The Present and Future of Streaming TV Advertising
More than anything, Netflix’s cheaper ad tier highlights how Advanced TV is revolutionizing the ways in which we watch television and advertise. As more players enter this growing space, there will be limits to what customers are willing to pay for, and advertising has long proven to be the solution for delivering desired content and programming to consumers at low to no cost. Thus, there is a greater demand for advertising-based video on demand, as these streaming companies must meet revenue goals one way or another. Additionally, with the increase in Connected TV ownership, additional opportunities arise for the targeting and personalization of ads. While CPMs are higher, and the same reach that one could receive through linear TV will be more expensive, Connected TV provides the opportunity for advertisers to pay less out of pocket in return for fewer impressions but delivered to a more targeted audience.
What does the future hold for advertising in this space? It is clear that the future will entail a mix of both paid-for and ad-funded TV services. Also, we now have the programmatic delivery of Advanced TV advertising, in which ads are automatically bought and shown to audiences. Advanced TV will continue to hone measurement standards that link linear TV and digital offerings, as data is necessary for advertisers to analyze the performance of their campaigns.
Streaming TV Advertising with The Ward Group
Yes, this can all be very daunting. As consumers continue to cut cords and seek their personal preferences among the growing number of platforms and subscription options in the market, there are a great number of factors to consider with your streaming TV ad dollars. However, The Ward Group is here to help you navigate these waters and create successful outcomes. We have the relationships and knowledge to get the most out of your streaming TV budget, so contact The Ward Group today to get started!