Netflix‘s plan to build an ad-supported subscription tier is moving fast. A recent Wall Street Journal report claimed that the streamer is looking to launch its new option by November 1 in order to hit the market ahead of a similar offering from Disney+. To meet that deadline, Netflix must convince advertisers that its unproven formats justify the hefty price tag that has reportedly been attached to them.
When Netflix CEO Reed Hastings first suggested that his company could launch a subscription with ads, he said the product could be developed “over the next year or two.” A lot has changed, however, since Netflix hired two Snap execs — Jeremi Gorman and Peter Naylor — to lead its ad business.
On August 10, Disney announced that an ad-supported tier for Disney+ would launch in December. Three weeks after that news broke, the WSJ report speculated on an accelerated timeline for Netflix’s offering. As Sega Dreamcast fans will tell you, the “launch before your competition” strategy is risky, but in the hyper-competitive world of streaming, every advantage counts.
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If Netflix is trying to roll out its ads on November 1, then it needs to work quickly to win over potential ad partners, but many buyers remain skeptical. One sticking point is the proposed price of Netflix inventory. The streamer has reported thrown out a $65 CPM as its asking price. According to Digiday, that would make Netflix ads more expensive than commercials at the 2021 Super Bowl.
There’s a good chance that the price of 1,000 Netflix impressions will go down during negotiations, but potential buyers have plenty of other questions about Netflix’s new service. Now that the streamer has an in-house ad sales team, what role is left for Microsoft, the company Netflix brought on as its official ad partner? What sort of targeting will be available? When will Netflix enable third-party tracking on its ads?
So far, advertisers seem to have more questions than answers. “We want to advertise on Netflix,” one potential buyer told Digiday. “It’s just they could have come out with something reasonable and then everything could have moved more smoothly. But that’s not what they did.”
If Netflix really wants to launch this product on November 1, one wonders how much inventory the company will be able to sell. Even the buyers who are interested have expressed reticence. “At anything above $20 [CPM], the feeling is, ‘Let’s let other advertisers wade into that pool first,'” one buyer told Variety.
Netflix itself has been quiet regarding these ongoing negotiations. “We are still in the early days of deciding how to launch a lower-priced, ad-supported tier, and no decisions have been made,” a company rep told Variety. “So this is all just speculation at this point.”