According to new reports, Netflix executives appear poised to push forward the launch of the streaming service’s ad-supported tier in an attempt to steal a march on rivals Disney Plus.
Variety Reports (opens in new tab) Netflix executives have made the decision to launch the new ad-supported tier on November 1 in most of the streamer’s key markets, including the US, Canada, UK, France and Germany.
The move marks a shift from the official position that Netflix’s co-CEOs Ted Sarandos and Reed Hastings revealed during the company’s earnings call last month, when the pair confirmed the new tier wouldn’t be rolled out until 2023.
But now, according to Variety, to try and get ahead of Disney, which is launching its cheaper ad-supported tier on December 8, Netflix is trying to get it live in early November.
Netflix has not confirmed the move, telling Variety’s reporter that they are “…still in the early days of deciding how to launch a cheaper ad-supported tier and no decisions have been made.”
However, the new report is consistent with information given to the Wall Street Journal (opens in new tab)which reported that Microsoft, which provides the platform for ads on Netflix, has asked ad buyers to submit an initial bid next week and they are looking for large bids.
How much do we talk?
As an opening salvo, Netflix wants potential advertisers to pay $65 CPM.
CPM is an acronym for cost per thousand impressions, a marketing term used to indicate the cost an advertiser pays per thousand ad impressions. For example, if a website publisher charges $2 for each CPM, that means an advertiser has to pay $2 for every 1,000 impressions of their ad.
Google’s average CPM is around $2.80, but it seems like Netflix is looking to go premium and $65 CPM is a lot higher than the industry standard for pre-rolled ads on a streaming service, which is under $20.
In addition, Netflix has asked for a minimum commitment of $10 million in annual agency ad spend and to commit purchases by the end of September. According to Variety’s report, Netflix executives expect 500,000 customers at the ad-supported level by the end of 2022.
As reported this weekend, it appears that Netflix is targeting a monthly fee between $7 and $9 for its ad-supported tier, with four minutes of ads in every hour of programming for series and pre-rolled ads for movies.
For the first phase of the launch, potential advertisers will be able to buy against Netflix’s top 10 most-watched TV series, with shows like The Crown and Dead To Me likely to be major targets. In the first phase, however, advertisers are not allowed to run ads based on geography within an area, i.e. not advertising a restaurant that is open in Kansas City, but not in Seattle. They also can’t run ads based on age, gender, viewing habits, or time of day, although you suspect it will all come in time.
Analysis: Why does Netflix have the guts to beat Disney?
When it comes to getting ads on Netflix, things have moved very quickly.
In early March, the company’s chief financial officer, Spencer Neumann, was still very conservative about the prospect, only going so far as to say he “could never say never” when asked about the idea of running ads on Netflix. and went as far as clarifying that the move was “not into” [the brand’s] plan now.”
Then, on April 20, during an earnings call, Netflix chief honcho Reed Hastings revealed that the streaming service was then “quite open” to the possibility of an ad-supported tier.
An ad-supported tier was then confirmed in July during the company’s next earnings call, but made it clear it wasn’t on the map until 2023.
Now we are in September and calculations and developments that would normally take years have been thrown into warp speed and ads will be on the platform by November 1st.
Why Netflix is doing this is beyond dispute. It needs more revenue, it needs to have subscriber growth again, and executives believe this is the way to do it.
Why it should stay ahead of Disney is less clear. Obviously there is only so much money for ads going around and for lucrative festive campaigns and the more deals it can close in advance the better.