What shows will Netflix advertise on?

Netflix has nearly completed its flip-flop on ads. Although we now know its ad-tech partner (Microsoft) and its launch date (“early 2023”), there’s still a lot we don’t know about AVOD Netflix. For example, what shows (and movies) will Netflix put ads on anyway?

The short answer is most – but not all – of the content. “The vast majority of what people watch on Netflix, we can include in the ad-supported tier – today,” the company’s co-CEO and chief content officer, Ted Sarandos, said during an interview. Tuesday’s second-quarter earnings conference call. “We will remove additional content, but certainly not all.”

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Sarandos was addressing what is considered one of Netflix’s biggest hurdles to launching ads: getting permission. He needs to renegotiate at least some contracts for third-party shows like “Breaking Bad” and also Netflix Originals that are produced by other studios. Sony makes “The Crown”, for example. When these deals were first made, the concept of Netflix with ads seemed laughable. The new reality brings an additional revenue stream, but it also comes at a cost: Studios are likely to demand a 15-30% premium in these renegotiations, The Wall Street Journal reported.

“It’s certainly nice to have…but it’s not a must-have,” CFO Spencer Neumann said of licensed content that may or may not end up at the cheapest, ad-supported tier. . What’s also nice is that many of the mostly syndicated third-party shows from broadcast and cable TV in the Netflix ecosystem already have built-in commercial breaks, should the streamer choose to go that route.

See what was good — and what wasn’t so good — about Netflix’s second-quarter earnings here.

OK, so we know that Netflix will probably be able to show ads on most anything it wants, but execution is still a big question mark. Netflix could retain some semblance of the premium experience members are used to and show ads only at the start and end of content, or go along with TV-style interruptions like Hulu. Or you can just keep paying the full monthly subscription fee to avoid ads altogether (but whether that price will increase remains to be seen).

Dean Norris in

Dean Norris in AMC’s “Breaking Bad,” streaming on Netflix. – Credit: AMC

CMA

According to Netflix, 60% of the content on its balance sheet is originals, which is part of an explicit strategy to move away from licensed shows and movies. (Ampere Analysis wrote in March that more than 3,700 of Netflix’s 7,000 shows and movies are originals or exclusives; based on current growth rates, 75% will be by the end of 2024.) There are had speculation that the streamer will not put ads. on its greatest originals, like how HBO Max’s ad-supported tiers maintain the sanctity of HBO shows like “Euphoria” by airing them commercial-free.

“Unless they decide to completely throw the subscription model out the window, you won’t necessarily see them putting ads in the middle of ‘Bridgerton’ or ‘The Crown,'” said Andrew McLean, managing partner at Inventus Media Partners. last week in a live chat with UBS media analysts. “They’re probably more likely to monetize the long tail.”

“We are still in the early days of deciding to launch a cheaper, ad-supported option and no decision has been made,” a Netflix spokesperson told IndieWire for this story. “So this is all just speculation at this point.”

McLean was among those at the five-day 2022 Cannes Lions International Festival of Creativity, where Netflix was the Belle (sorry, Disney) of the ball. The streaming giant’s executives held a tribunal, he said, asking the ad industry what it expects of them. Well, now what media buyers want from them and Microsoft.

Netflix announced last week that Microsoft would power its advertising and sales technology efforts, a crucial ingredient to get everything up and running. Microsoft’s existing architecture powers ads for Bing and other search engines — and unlike other options Netflix is ​​considering, like Google and Comcast, doesn’t directly compete with the streamer in the content game.

Netflix COO Greg Peters said Microsoft will work with Netflix over the next few years to create “a new advertising ecosystem around premium TV.” The goal: “incredible” experiences for users and advertisers, he said.

The plan is to launch ad-supported tiers in territories with mature ad markets (you can bet that includes the US) and over time to build capacity and see more and more subscribers choose advertisements. Netflix wants to keep things simple, with a “good, better, better” tier system similar to what it currently offers. And finally, Netflix promises to blow everyone away with advertising.

(Almost) whatever the product, AVOD Netflix provides a lifeline – both internally and externally. McLean said he expects “very, very positive” reception to both the addition of more commercial inventory in the marketplace and the “quality” of Netflix’s specific inventory. Now we just have to wait and see how much of that inventory adds ads.

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