Netflix executives appear poised to bring forward the launch of the ad-supported streaming service in a bid to steal the lead from rivals Disney Plus, according to new reports.
Variety Reports (opens in a new tab) Netflix executives have made the decision to launch the new ad-supported tier on November 1 in most of the streamer’s major markets, including the US, Canada, the UK, France and Germany.
The move marks a change from the official position Netflix co-CEOs Ted Sarandos and Reed Hastings revealed during the company’s earnings call last month when the pair confirmed the new level would not be implemented until 2023.
But, now, according to Variety, to try to get ahead of Disney, which will release its cheapest ad-supported tier on December 8, Netflix is pushing to make it available in early November.
Netflix has not confirmed the move, telling the Variety reporter that “…they are still in the early days of deciding how to launch a lower-priced, ad-supported tier and no decisions have been made.”
However, the new report matches information provided to the Wall Street Journal. (opens in a new tab)who reported that Microsoft, which provides the platform for advertising on Netflix, has asked ad buyers to submit initial bids next week and is looking for big deals.
How much are we talking?
As its opening salvo, Netflix wants prospective 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 for every thousand ad impressions. For example, if a website publisher charges $2 for each CPM, that means an advertiser must pay $2 for every 1,000 impressions of her ad.
Google’s average CPM is around the $2.80 mark, but it seems like Netflix wants to be premium, and $65 CPM is way higher than the industry standard for pre-roll ads on a streaming service, which costs less than $20.
On top of this, Netflix has requested a minimum commitment of $10 million in annual ad spend from agencies and that purchases be locked in at 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 charge of between $7 and $9 for its ad-supported tier, with four minutes of ads in every 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 will not allow advertisers to run ads based on geography within a territory, so a restaurant that is open in Kansas City, but not Seattle, will not be advertised. They also won’t be able to serve ads based on age, gender, viewing behavior, or time of day, though he suspects that will all come with time.
Analysis: Why is Netflix trying hard to beat Disney?
When it comes to getting ads on Netflix, things have moved very fast.
In early March, the company’s CFO, Spencer Neumann, was still very conservative about the outlook, going so far as to say “never say never” when asked about the idea of running ads on Netflix, and he came so away as clarifying that the measure “was not something in [the brand’s] plans right now.”
Then on April 20, during an earnings call, Netflix boss Reed Hastings revealed that the streaming service was “pretty open” to the possibility of an ad-supported tier.
An ad-supported level was then confirmed in July on the company’s next earnings call, but made clear it wasn’t planned until 2023.
We are now in September and the calculations and developments that normally take years have been accelerated and the announcements will be on the platform on November 1st.
Why Netflix is doing this is not in question. It needs more revenue, it needs to have subscriber growth again, and executives are convinced this is the way to do it.
Why he needs to get ahead of Disney is less clear. Clearly, there’s only so much advertising cash going around and for lucrative holiday campaigns and the more deals you can close in advance, the better.