Last month, Netflix’s stock price fell after that the news appeared that streaming giant has lost 200,000 subscribers worldwide. Shortly after the announcement was made, one of the CEOs of Netflix Reed Hastings revealed its company’s long-term plans to launch a level with advertising support.
While there aren’t many details yet on what the subscription level on Netflix with ad support will look like, Hastings said it is expected to be launched in “the next year or two”.
Media Week talked to Andrew Gilberthead of the platform strategy in Australia and New Zealand Yahoo, Stuart Gurneychief strategic officer Kimeraand Paul ShinkinsonAustralia ‘s CEO Analytical partners about what an ad-supported subscription will look like on the streaming giant and what it will mean for advertisers.
Nuts and bolts
How significant can an ad-supported Netflix subscription level be for the industry? Shinkinson says it could be massive.
“Due to the fact that linear television is losing so many viewers, BVOD doesn’t seem to be adding as much extra. Everyone says, “Oh, that adds extra coverage,” but that only adds five to six percentage points.
«We never know exactly what the size of Netflix is in Australiabut if estimates of 6 million subscriptions and 14 million viewers in four weeks are real, it will be significant additional coverage. It can be huge, but it’s a big question mark. “
For Gilbert and the Yahoo team, deliveries – wherever they come from – are very important. This is also something that the new level of Netflix can provide rapidly.
“When you start gaining access to more and more premium supplies, it means only the best things for brands and marketers and their ability to achieve their goals.
“If Netflix or any of the other subscriber platforms like Disney, etc., start to open it up, it just means more and more opportunities for brands that will be able to do it, and for us so we can grow with those brands at the same time. “
There are some key factors to consider when launching an ad-supported subscription level, and for Gilbert this is primarily about the consumer experience.
“It’s really important to think about what’s going on from a consumer perspective. There is a study from Deloitte that talks about how the number one reason why someone subscribes to the platform is primarily low cost, but the number one reason why they leave is high cost.
“When we talk about a model that is funded by advertising, when consumers are still paying but they are also receiving advertising, the most important thing to think about is the consumer experience.”
Attract advertising to Netflix
For advertisers, the first question to ask will be about what benefits a subscription level can offer on streaming platforms such as Netflix. Gilbert says giving advertisers the opportunity to finally enter the SVOD market is a major benefit.
“In terms of advertising, you have really strong and engaged consumers who have been sitting on these SVOD platforms for a long time, which advertisers have not been able to reach.”
However, so far Gilbert predicts that coverage may not be global.
«I don’t think Netflix will immediately open it up worldwide. They will no doubt conduct tests in different markets and then start scaling them wherever they need to. ”
One of the problems with creating an ad that would make its way onto the platform is that Netflix’s consumer demographics are so broad and diverse.
“I would suggest that brands that can create ads designed for this platform are likely to resonate more,” Gurney says. «Using the behavior of people on the platform and any interesting or notable shows, I think these are great opportunities for brands».
So which brands are best suited for hosting on a streaming platform such as Netflix?
“If we start talking about the different types of brands that can actually get on it, it’s going to be the ones that want to go after those types of consumers that they couldn’t touch before,” Gilbert says. “These will be those who want to personalize with potential data that is also available at Netflix. Then marketers will want to reach consumers who play an important role in their purchases of free air or linear television, which they are doing right now. ”
As a multinational corporation itself, it would make sense that Netflix would attract the attention of major global advertisers. Hopefully, Gurney says, it’s not the only brand running on the platform.
“With a powerhouse like Netflix, you can automatically see global brands and large global conglomerate deals that could harm some local brands, potentially, in certain categories – especially if they have things like category exclusivity within those deals. But I think it’s a universally attractive offer for many brands, depending on their needs. ”
Many of the streaming services do not release accurate viewer numbers – rather they release random shots. While this fact is another hurdle when it comes to the potential level supported by advertising, Gurney says it is impossible to eliminate.
“If I were sponsoring a show, or if I was sponsoring a segment, I would be embarrassed not to know what the data level is and what those coverage figures will be. However, like most BVODs, we tend to buy software or buy based on CPM anyway, so we don’t actually buy software. Usually we try to buy an audience.
“I don’t think it would be too much of a problem, but it would be if I was doing a big integration piece or something that’s very custom-made around a show like Strange things “I would like to know the exact numbers.”
However, as Shinkinson notes, this isn’t the first time advertisers haven’t known the exact number of eyes that have attracted their products.
“I don’t think we need a total number of users. If you think about it, when we measure impact outside the home, we don’t know exactly how many people pass by each billboard. We measure radio and television based on small samples. So there are ways to get around. “
While a lack of accurate viewer numbers may not be too much of a problem, barriers such as password sharing can be harder to overcome. According to Shinkinson, this problem is incredibly common.
“There’s a fuss going on about‘ the right person at the right time ’when it comes to serving people advertising. Also, there is a reality, which is that if someone over the age of 40 has an account, we know from password sharing that you are probably beating up a family, not a specific person.
“How much significant targeting can you really do? Who knows. Netflix themselves do not know who their users are because of this password sharing problem».
Gilbert says this problem can be especially biting when it comes to personalizing advertising.
“If Netflix is going to hit the market with this and they’ll talk about targeting, they can keep their data to themselves and have a relationship only with the advertiser. We know that they are really very limited in terms of sharing this data with brands.
“If they’re going to share this, then it’s going to be a premium deal with advertisers and then maybe as an app. They can start sharing them with platforms that can also be targeted. ”
While it’s always hard to peek into the crystal ball, Gurney says the impact of subscription levels on streaming services can be felt in the industry down to the local level.
«I see that something like Netflix is coming and really eating a lot of BVOD player pieso this can be quite a threat to their work.
“Coca-Cola has done something with Strange things global. I really hope we don’t see global companies coming and grabbing and not giving local brands the opportunity to build their own connections with the audience through the Netflix platform. ”
While the Netflix level with ad-supported can eat the BVOD pie, Shinkinson says linear television can also see the implications of that decision.
“Most likely, it will affect TV networks. But having said that, I think this is Nirvana for advertisers. That would take us back to the point where we can say that linear television, streaming television and some YouTube or social networks can bring you back to the great coverage you need. ”
Changes in the future may not be that far off, and Gilbert says you may not need this crystal ball to see what lies ahead for the industry ahead.
“Netflix is not the first to do this, you have vendors in the market such as Tubi who are already doing it as a free supported model. It won’t be something that will affect the industry in the future, these are changes that have already begun to take place».