Netflix executives appear ready to go ahead with the launch of the streaming service's ad-supported tier in a bid to steal the lead from rivals Disney Plus, according to new reports.
Variety reports (opens in a new tab) that Netflix executives made the decision to launch the new ad-supported level on November 1 in most major streamer markets, including the US, Canada, UK, France and Germany.
The move marks a change from the official stance that Netflix co-CEOs Ted Sarandos and Reed Hastings revealed during the company's earnings call last month, when they both confirmed the new level would not be implemented until 2023.
But, now, according to Variety, to try to get ahead of Disney, which launches its cheapest ad-supported tier on December 8, Netflix is pushing to release it in early November.
Netflix did not confirm this decision, telling the Variety reporter that they were still in the early days of deciding to release a cheaper ad-supported level and no decision was made.
However, the new report is consistent with information provided to The Wall Street Journal (opens in a new tab), which reported that Microsoft, which provides the advertising platform on Netflix, has asked ad buyers to submit initial bids on next week and they are looking for great auctions.
How much are we talking?
Like its opening salvo, Netflix wants potential advertisers to pay €65 CPM.
CPM stands for cost per thousand impressions, a marketing term used to refer to the cost an advertiser pays for every thousand ad impressions. For example, if a website publisher charges $2 per CPM, that means an advertiser must pay $2 for 1000 impressions of her ad.
Google's average CPM is around $2.80, but it seems like Netflix wants to be premium and the $65 CPM is much higher than the industry standard for pre-roll ads on a streaming service, which costs less than €20.
On top of that, Netflix has requested a minimum commitment of €10 million in annual ad spend from agencies and that purchases be locked in by the end of September. According to the Variety report, Netflix executives expect to have 500.000 customers in their ad-supported tier by the end of 2022.
As reported over the weekend, it appears that Netflix is targeting a monthly fee of between €7 and €9 for its ad-supported tier, with four minutes of ads per hour of programming for series and pre-roll ads for movies.
For the first phase of launch, potential advertisers will be able to shop against Netflix's top 10 most-watched TV series, with shows like The Crown and Dead To Me likely to be key targets. However, the first phase won't allow advertisers to run ads based on the geography of a territory, so ads won't open for a restaurant in Kansas City, but not in Seattle. They also won't be able to serve ads based on age, gender, viewing behavior, or time of day, even if you think everything will happen on time.
Analysis: Why is Netflix busting its guts to beat Disney?
When it comes to showing ads on Netflix, things have moved very fast.
In early March, the company's chief financial officer, Spencer Neumann, was still very conservative about the outlook, going so far as to say "never say never" when asked about the idea of introducing ads on Netflix and responding. that far. as clarifying that the measure "was not something in the plans right now".
Then, on April 20, in an earnings call, Netflix boss Reed Hastings revealed that the streaming service was "quite open" to the possibility of an ad-supported tier.
An ad-supported level was confirmed later in July during the company's next earnings call, but made clear that it wasn't expected until 2023.
It is now September and the calculations and developments that normally take years have accelerated and the announcements will be on the platform on November 1st.
Why Netflix is doing this is beyond question. It needs more revenue, it needs to get subscriber growth back, and executives are convinced this is the way to do it.
Why it has to get ahead of Disney is less clear. It is clear that not much money comes from the party's lucrative advertising and campaigns and the more deals he can close in advance, the better.