After reporting that Netflix will be releasing a less expensive subscription tier to the platform that will include ads by the end of the year. However, marketers aren’t impressed by the cost to run ads and are questioning whether the endeavour will be worth it.
A steep entry price for ad spots have been hinted at through news reports and various media outlets in conversation with The Drum. At US$65 CPM, the cost of running ads is significantly higher than many streaming services, marketers are questioning its worth.
Another concern arises when marketers consider whether Netflix’s ad model will deliver or fall short, especially given that the price is higher than the significantly sought after Super Bowl.
Netflix’s early sales talk have not been released to the public as of late. A spending limit of US$20 million was initially talked about by Netflix to prevent any one brand cluttering the ad spot. This was later claimed as a miscommunication, or a change of price, indicating that the brand is still developing the platform.
Secondary brand marketer commented on the minimum spend being restrictive for national advertisers: “It has to be a global deal, for example, there’s no way someone in the UK would pay that on its own.” Another marketer inquires why Netflix would deviate from the most favourable CPMs at a national level for an untested tier.
What about subscribers?
Subscribers may be expecting the same ad to roll, as experienced in ABC’s iView, but customers would question why bother paying for a tier that rolls ads on the same level that a free subscription service already offers.
Additionally, Netflix will currently launch the new tier without a measurement partner, as it is yet to announce one. This is a deal breaker for marketers, as they prefer a safety net to demonstrate how the platform will run.
Regardless of these qualms, Netflix is likely to find enthusiastic buyers, with Quibi securing US$100 million in pledges ahead of the launch.
Netflix’s product is currently being taken care of by Xandr, Microsoft’s ad-tech firm. An AV buyer expresses worry over the partnership potentially locking into a long-term walled garden. “You can’t do that, it’s not YouTube. It’s not even Amazon. Netflix says you can only buy one way at a very high CPM with a very limited reach.”
On top of all this, marketers question whether Netflix will reach a large enough audience to make advertisers worth considering. Reports vary between 500,000 and 4.4 million depending on traction.
Especially as Netflix is struggling to keep up with competition, especially with so many platforms offering live sports, a media buyer wonders if the subscription service will continue to be a major contender. “Every other streamer has it, it keeps their audience engaged and they come back monthly. If Netflix doesn’t have a good list of content, subscriptions will disappear and there will be no reach, so it’s a very precarious position.”
As most of the information about the new ad-based subscription is speculation, it will be interesting to see how Netflix will continue forward.