Netflix, despite being the largest streaming service, struggles to make a significant impact in the advertising market, ranking barely in the top 10. The media business has experienced various eras, alternating between growth and austerity, with the latest growth phase driven by subscriptions from services like Netflix and Spotify. However, the industry is now seeking new ways to generate sales, with some companies turning to video games, theme parks, or a combination of ads and subscriptions.
Netflix has considered creating free versions of its service in markets like Europe and Asia to increase its audience and advertising inventory. Although a free plan was tested and discontinued in Kenya, discussions are ongoing about implementing similar strategies in larger markets. However, there are no plans for a free service in the US.
Challenges and Progress
Netflix's advertising business, although growing, is still small compared to competitors. The company has been slow to scale and has faced challenges, such as not delivering as many ad impressions as promised and strained relationships with partners like Microsoft. Despite these issues, Netflix's ad-supported tier has been successful in attracting price-sensitive customers.
Competitors like Amazon and Disney have adopted different advertising strategies, turning ads on for all viewers and charging lower rates to attract advertisers. This approach has quickly built large audiences, with more than 75% of Prime Video viewers watching with ads. Netflix's more customer-friendly approach has been slower but is expected to evolve, potentially introducing ads to its most popular tier in the future.
Future Prospects
To increase advertising inventory, Netflix is exploring live events and sports, where ads are shown regardless of the subscription tier. The company aims to make advertising a significant part of its business, bringing more technology and sales in-house.
In Cannes, companies showed a renewed interest in selling advertising, including non-traditional players like Target and Uber. However, there was a notable absence of political discussions, reflecting a shift away from companies taking stances on social issues unless aligned with their values.
Additional Insights
- Warner Bros. Discovery and Paramount Global: Shares plunged to new lows.
- NBA Finals: TV ratings fell, marking one of the least-watched finals.
- Tubi: Now more popular than Disney+ in the US.
- OpenAI Co-founder: Launched a new company named Safe Superintelligence.
- Xinjiang TV Show: Attempts to soften the image of the Chinese province.
- Inside Out 2: Achieved the biggest opening weekend since Barbie, grossing over $700 million.
- YouTube TV: Experienced a decline in customers, reflecting broader challenges in the pay-TV market.
Netflix faces significant challenges in scaling its advertising business but is making strategic moves to increase its advertising inventory and revenue. The company's future growth may depend on its ability to integrate ads more effectively and compete with established players like Amazon and Disney.
