Netflix was the first of its kind, paving the way to an ad-free, on-demand television empire.
For over a decade now Netflix has been consistently bagging more subscribers every quarter, maintaining its spot as the undisputed king of streaming. However, in Q1 of 2022, Netflix recorded its first massive subscriber loss in over ten years. As a response to this loss, Netflix announced a new subscription model: a cheaper per-month option for those looking to spend a little less. The catch? Advertising.
This new tier has been debuted in 8 countries on 3rd November 2022. The intention behind the new subscription model is to capture a new market who are not phased by ads and wishes to save some money. This also opens new avenues for advertisers across the globe, but how useful this new model will be for brands is yet to be seen.
What does this mean for consumers?
The subscription will not replace any existing packages but will become the newest, cheapest option.
Netflix will not show more than five minutes of ads per hour of content (on average), which is two minutes lower than the UK TV advertising regulations. The company has also stated that the number of times a single user will be shown the same advertisement will be limited.
Similarly to YouTube’s advertising model, Netflix will include both pre and mid-roll ads depending on the content, lasting 15 or 30 seconds. It is worth noting that this cheaper subscription does not feature the entire Netflix catalogue.
It’s uncertain whether or not this ad-based subscription will take off. Given the current state of the economy, it can’t be a bad idea for Netflix to be offering a cheaper option for those looking to save some cash. Besides, before streaming services were about there was little to no way to avoid advertisements, so I don’t see the harm in heading back that way in order for consumers to save some money.
What does this mean for advertisers?
Netflix announced that advertisers will be capped between $10 million and $20 million, in an attempt to limit the frequency and repetition of ads for users. It seems as though Netflix is looking for fewer advertisers with deeper pockets, rather than a wide range of brands of varying sizes. Some of the brands confirmed to be advertising with Netflix’s UK services are Ernest Jones, HSBC and Lidl.
Netflix has announced a ‘soft’ CPM of $65. This is the priciest of all the streaming platforms, however, is likely negotiable on an individual basis. Whilst being the most expensive, Netflix is the largest streaming site, so if you were going to pay for an advertisement of this nature it may be worth spending a bit extra to hit the largest audience base.
Netflix has proven its ability for clever and tasteful product placements, advertising Coca-Cola within a few of its original shows. Now, moving further into the world of advertising, Netflix has stated that its standards remain high, with plans to examine every ad to ensure high-quality messaging and creativity.
Netflix has a wealth of user data collected over years of service, such as user interests and demographics. Despite this, the first roll-out of the new subscription model will only allow for very limited targeting ability. Netflix has expressed the want to develop this over time, but for now, it is definitely less than exciting for advertisers. Country-based targeting has been confirmed, however, this is as far as they’re stretching for now.
Advertisers will be able to bid for spots on Netflix’s top 10 most-viewed series, as well as bidding for certain content genres as a way to home in their advertising. Netflix has announced that it’s planning to launch demographic targeting in Q1 of 2023, so hopefully, the options for targeting will continue to develop over time.