Netflix has launched its first subscription package featuring ads in a drive to reignite growth by attracting cost-conscious users, but the hurried launch, high prices for slots and accompanying demands have left some advertisers unconvinced.
Basic with Ads, which went live in 12 countries this week, costs £4.99 a month in the UK – £2 less than its cheapest ad-free package – and hopes to lure households whose budgets are shrinking in the cost of living crisis.
However, while Netflix hits including The Crown and Stranger Things will be available, about 5-10% of content it licenses from big Hollywood studios, such as Universal Pictures and Sony, has yet to be renegotiated for the service because of its shortened seven-month launch timeline.
The world’s biggest streaming company said it had almost sold out all of the ad inventory at launch – a light load of four to five minutes an hour, compared with a traditional UK TV broadcaster, which can air up to 12 minutes hourly in peak evening viewing time.
Beauty brands including L’Oréal and Nyx and Anheuser-Busch InBev, the world’s largest brewer, which owns brands including Stella Artois and Budweiser, have jumped at the chance to be named as launch partners.
However, a number of media agencies, which buy advertising space on behalf of clients, are unimpressed with the product brought to market and the demands made on them to sign up.
“Unless you’re an advertiser who desperately wants the PR of being first on Netflix there are plenty of issues ahead of doing a decent ad deal for clients at launch,” said one media agency senior executive involved in talks about buying ad space.
In April, Netflix reported its first quarterly decline in subscriber numbers in more than a decade, prompting investors to wipe more than $100bn (£88bn) off its market value. The company responded by announcing that after years of opposing the idea it would start an ad-supported tier next year. That deadline was then hastily accelerated to beat a similar offer from Disney+ going live in the US from 8 December.
Netflix is selling its ad slots via Microsoft at a premium price of about £50 for each 1,000 viewers reached. That is about twice the rate that ITV and Channel 4 charge advertisers on their streaming services, and closer to the cost of traditional 30-second ad breaks on established broadcast TV channels.
Netflix is also making demands for quarterly guarantees of spend by advertisers, but without independently verified audience data and a lack of the ability to target ads, and one media source said they were told they had to sign a deal in a week or miss out until January.
At launch, Netflix does not have the technical capability of specific demographic targeting, such as the ability to reach 16- to 34-year-old audiences highly coveted by advertisers, and other standard features common in traditional broadcast and video-on-demand TV.
Netflix, which is only asking those subscribing to its new ad-supported tier for their date of birth and gender when they sign up, is trying to build credibility by signing with various independent organisations such as Barb (the Broadcasters’ Audience Research Board) and the measurement partners DoubleVerify and Integral Ad Science.
It intends to build a much more robust offer to lure advertisers including wider ad targeting capability next year – at which point it intends to raise prices – when more will be known about the popularity of the new package and audience viewing habits.
