Netflix executives look set to bring the launch of the streaming service's ad-supported tier forward in a bid to steal a march on rivals Disney Plus, according to new reports.
Variety reports (opens in new tab) that Netflix executives have taken 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 shift from the official position Netflix's co-CEOs Ted Sarandos and Reed Hastings revealed during the company's earnings call last month when the pair confirmed that the new tier wouldn't be rolled out until 2023.
But, now according to Variety, to try and get ahead of Disney, which is launching its cheaper, ad-supported tier on December 8, Netflix is pushing to get it live at the start of November.
Netflix hasn't confirmed the move and told Variety's 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 chimes with information given to the Wall Street Journal (opens in new tab), who reported that Microsoft, which is providing the platform for advertising on Netflix, have requested ad buyers submit initial bids next week and they're looking for big bids.
How much are we talking?
As its opening salvo, Netflix wants would-be advertisers to pay $65 CPM.
CPM is an acronym for cost per thousand impressions, a marketing term used to denote the cost an advertiser pays per one thousand advertisement impressions. As an example, if a website publisher charges $2 for each CPM, that means an advertiser must pay $2 for every 1,000 impressions of its ad.
Google's average CPM is around the $2.80 mark, but it seems Netflix wants to go premium and $65 CPM is a lot higher than the industry standard for pre-rolled ads on a streaming service, which is under $20.
As well as this, Netflix has asked for a $10 million minimum commitment in annual ad spending from agencies and for the buys to be locked in by the end of September. According to Variety's report, Netflix executives expect to have 500,000 customers on its ad-supported tier by the end of 2022.
As reported over the weekend, it seems 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-rolled ads for movies.
For the first phase of launch, would-be advertisers will be able to buy against Netflix’s top 10 most-viewed TV series, with shows like The Crown and Dead To Me likely to be key targets. The first phase won't allow, however, advertisers to serve ads based on geography within a territory, so no advertising a restaurant that's open in Kansas City, but not in Seattle. They also won't be able to serve ads based on age, gender, viewing behavior or time of day, though you suspect that's all to come in time.
Analysis: Why is Netflix busting a gut to beat Disney?
When it comes to getting ads on Netflix, things have moved very fast.
At the start of March the company Chief Financial Officer Spencer Neumann was still being very conservative about the prospect and would only go as far as saying that he could “never say never” when asked about the idea of introducing adverts on Netflix and went as far as clarifying that the move was “not something in [the brand’s] plans right now.”
Then, on April 20, during an earnings call, Netflix head honcho Reed Hastings revealed that the streaming service was then “quite open” to the possibility of an advert-supported tier.
An ad-supported tier was then confirmed in July at the company's next earnings call, but it made it clear that it wasn't on the cards until 2023.
Now we're in September and calculations and developments that normally take years have been thrown into warp speed and ads will be on the platform by November 1.
Why Netflix is doing this isn't in doubt. It needs more revenue, it needs to have subscriber growth once again and executives are convinced this is the way to do it.
Why it needs to get ahead of Disney is less clear. Clearly there's only so much cash from advertising going around and for lucrative festive campaigns and the more deals it can lock up in advance, the better.
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