November, Netflix unveiled Its long-awaited ad-supported tier offers customers in select markets, including the US, the ability to offset the cost of a Netflix subscription by allowing their viewing to be interrupted by ad interruptions.exist Consumer Electronics Show In Las Vegas, Netflix president of global advertising, Jeremi Gorman, offered some first insights into how the product is performing and what the streamer’s plans are for the future.
During an interview at Variety’s Entertainment Summit Consumer Electronics Showthe executive said the company is pleased with the debut advertiser selection and its diversity.
“It’s really comprehensive,” Gorman said of the various brands involved. “We see CPG companies, luxury companies, automotive companies…[and] retail. We see a wide range. It’s also good for the consumer experience, she noted, because it means viewers won’t get bored with one car ad after another. predicted.
The interview also addressed some of the early complaints and concerns about Netflix’s foray into advertising.
One of them is the major pushback the company has faced over its high advertising prices, demanding access to what one industry executive called the “Super Bowl” content CPMGorman, however, justified the pricing but acknowledged that the market will ultimately determine what kind of pricing Netflix can get.
“From a supply and demand standpoint, premium CPMs reflect two things: One is that we can’t accept that many advertisers. We certainly don’t want to disappoint anyone. Second, I think the premium content Guaranteed high CPM.”
Of course, whether Netflix constitutes a “premium environment” is open to debate. But Netflix appears to be adjusting its expectations.
“I think we’re definitely humble enough to know very well that we’re leading the market, and beyond that, the market will more or less tell us what a reasonable CPM is,” Gorman said.
Another issue with Netflix’s ad-supported service has to do with what content can contain ads. Because the streamer wasn’t set up as an ad-supported service to begin with, many of its content deals don’t include AVOD rights (advertising video on demand). This means that Netflix has limited ad inventory and can’t even run ads for some of its own “Netflix Originals” if the deal doesn’t include the proper rights.
Gorman touched on this as well, saying Netflix is actively working on the licensing issue.
“As we speak, it’s improving day by day. We’re renegotiating deals we made a long time ago,” she said, adding that the “vast vast majority” of content that people regularly watch is available on the ad layer surface. Meanwhile, Netflix has about 85% to 95% of its content available at the ad tier, Gorman said.
And then there’s the real concern that, from a business standpoint, offering lower cost packages has the potential to cannibalize Netflix’s existing subscriptions as customers move to cheaper packages at a faster rate that won’t be advertised offset by the growth. However, Gorman downplayed those concerns, saying Netflix customers have historically stayed on their current plans.
Unfortunately, as Netflix prepares to report earnings, the executive couldn’t talk about usage of ad-supported products, but said “we’re pleased with the growth we’re seeing.”
Currently, Netflix’s ad tier is available in the US, UK, France, Germany, Spain, Italy, Australia, Japan, South Korea, Brazil, Canada, and Mexico. The company has no near-term expansion plans, but the long-term goal is to target any larger advertising market. In addition to ads, subscribers to the Basic with Ads plan also have to deal with lower video quality (720p HD) and are limited to streaming from one device. They also cannot download content to their devices for offline viewing.
Going forward, Netflix is aiming to go beyond running typical ads, to include dynamic insertion of ads at moments relevant to marketers, single-show sponsorships, and more. It will also later allow marketers to target ads by age and gender.
