LOS ANGELES, CALIFORNIA – JUNE 12: CEO of Netflix Ted Sarandos attends Netflix’s FYSEE event for “Squid Game” at Raleigh Studios Hollywood on June 12, 2022 in Los Angeles, California. (Photo by Charley Gallay/Getty Images for Netflix)
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CANNES, France – Because the world’s biggest promoting conference gets underway here this week, all eyes will probably be on Netflix for clues on how the streaming giant plans to interrupt from its ad-free business model to supply a less expensive subscription for the primary time.
Netflix Co-CEO Ted Sarandos is scheduled to cap off per week of panels with a chat on Thursday on the Cannes Lions festival, which is returning after a two-year hiatus throughout the pandemic and has named Sarandos its “Entertainment Person of the Yr.” The panel comes amid expectations that demand will grow for cheaper, ad-supported streaming subscriptions as inflation pressures people to chop costs.
Attendees will even be searching for clues on who Netflix will partner with for its foray into the promoting world, which it plans to ramp up quickly to begin selling ads as early because the fourth quarter. Sources told CNBC that Netflix has met with Google, which makes most of its revenue from ads. It has also met with Comcast/NBCUniversal and with Roku to debate ad-sales partnerships, as previously reported by The Information. NBC Universal and Google declined to comment.
“We’re still within the early days of deciding the best way to launch a lower priced, ad-supported option and no decisions have been made. So that is all just speculation at this point,” Netflix said in a press release.
The corporate is seeking to secure a marketing partners in the following two to 3 months and quickly hire a senior executive and assemble a team to administer the connection with its partners, based on a source who requested anonymity.
Making the ad dollars flowing into streaming entertainment is top of mind for a lot of festival attendees. In April, Netflix said it could offer a less expensive ad-supported option after it reported losing subscribers for the primary time with competition intensifying within the streaming space. Sarandos’ talk at Cannes was scheduled before Netflix announced its coming move.
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Disney+ can be preparing to launch an ad-supported service later this 12 months. Paramount+ has an ad-supported tier and free ad-supported Pluto. The newly merged Discovery Warner Brothers with a mix of its streaming services expected, and Roku, with its growing ad business. CNBC’s parent company NBC Universal also already offers a less expensive ad-supported subscription for its Peacock service.
The corporate might want to weigh the benefits and drawbacks of every of the potential partners. Google, for instance, has the advantage of being the world’s largest ad giant, but has less experience with entertainment content despite its recent push into the space.
Comcast doesn’t have the worldwide reach as Google, but its NBC Universal unit is a pacesetter in selling ads for that premium TV content. The cable giant’s Freewheel ad tech platform can be utilized by many media firms and will offer Netflix its programmatic ad-buying tools. Plus, NBC Universal just expanded partnership with Apple to sell its ads, establishing precedent for it partnering to sell ads for premium content at scale.
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Another choice is Roku, a longtime partner of Netflix that was previously spun off from the streaming giant. As the most important TV operating system within the U.S., Roku has the advantage of its scale within the U.S., Canada and Mexico and its insight into ad-supported subscription trends.
The potential partnerships would proceed an extended history of rivals teaming up within the media industry. As a content distributor and an entertainment company, for instance, Comcast usually strikes distribution deals with rivals to its NBC Universal. And Roku partners with streaming apps while offering its own free ad-supported alternative within the Roku Channel.
The stakes are high for Netflix. Its stock is down nearly 50% because it warned of its contracting subscriber base. Offering a less expensive ad-supported service is one technique to stop the cancellations from continuing as people look to trim costs, but Netflix has to make sure the promoting experience won’t turn off viewers.
Disclosure: CNBC is owned by Comcast’s NBCUniversal.