Netflix’s executives look poised to speed up the launch of an ad-supported level of streaming service to steal the march on Disney Plus rivals, according to new reports.
Variation reports (opens in a new tab) that Netflix executives made the decision to launch the new tier on November 1 in most major streamer markets including the US, Canada, UK, France and Germany.
The move marks a departure from the official position of Ted Sarandos and Reed Hastings, Netflix’s co-CEOs, revealed in a profit call last month when the pair confirmed that the new tier would not be introduced until 2023.
But now, according to Variety, to try and overtake Disney, which launches a cheaper, ad-supported tier on December 8, Netflix is pushing to launch it in early November.
Netflix did not confirm the move and told reporter Variety that “… still at the beginning of deciding how to run a cheaper, ad-backed tier, and no decisions have been made.”
However, the new report is consistent with information reported to the Wall Street Journal (opens in a new tab)which reported that Microsoft, which provides a platform for advertising on Netflix, has asked buyers to submit initial bids next week and they are looking for big deals.
How much are we talking?
As an opening volley, Netflix wants potential advertisers to pay $ 65 CPM.
CPM is an acronym for cost per thousand impressions, a marketing term used to describe the cost an advertiser pays for a thousand impressions of an ad. For example, if a website publisher charges $ 2 for each CPM, that means the advertiser must pay $ 2 for every 1000 impressions of their ad.
Google’s average CPM is around $ 2.80, but it looks like Netflix is looking to upgrade to premium, and the $ 65 CPM is much higher than the industry standard for streaming pre-ads, which is under $ 20.
In addition, Netflix asked for a minimum commitment of $ 10 million in annual advertising spend from the agency and to block purchases until the end of September. According to a Variety report, Netflix executives expect it to have 500,000 ad-level customers by the end of 2022.
As reported over the weekend, Netflix appears to be aiming for a monthly fee of $ 7- $ 9 per ad level, with four ad minutes each hour of series programming and pre-rolled ads for movies.
In the first phase of launch, potential advertisers will be able to buy on top of Netflix’s top 10 most watched TV series, with shows like The Crown and Dead To Me likely to be key targets. The first phase, however, will not allow advertisers to serve ads based on geographic location within the territory, so you will not advertise a restaurant that is open in Kansas City but not in Seattle. They also won’t be able to show ads based on age, gender, way of viewing, or time of day, though you suspect all of this will come over time.
Analysis: Why is Netflix trying to beat Disney?
When it comes to showing ads on Netflix, things happened very quickly.
In early March, the company’s chief financial officer, Spencer Neumann, continued to be very conservative about this perspective and went so far as to say “can never say never” when asked about the idea of introducing Netflix advertising, he went so far as an explanation that the movement was “not something in [the brand’s] plans right now. “
Then, on April 20, while talking about earnings, Netflix chief Reed Hastings revealed that the streaming service was then “fairly open” to the possibility of an ad-level existence.
The ad-backed level was then confirmed in July during the company’s next earnings call, but it was clear it was not on the cards until 2023.
We are now in September and the computation and development that usually takes years has been sped up with ads running on the platform by November 1st.
There is no question why Netflix does this. It needs more revenue, a renewed increase in subscribers, and management believes this is the right thing to do.
Why it needs to stay ahead of Disney is less clear. Apparently, there’s only so much cash out of advertising and lucrative holiday campaigns, and the more deals he can close ahead of time, the better.