Netflix has lots more advertising juice to squeeze

Welcome to an end of week update from Unmade. Today, the hoofbeats of the Netflix charge into advertising get louder. And further down, the Unmade Index runs out of steam.

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More advertising juice left in the Streamberry

Tim Burrowes writes:

It’s been a week of the TV industry talking to each other on stage and at conference cocktail parties.

In the US, executives from Netflix were at Advertising Week, speaking to delegates about their ambitions for the streaming service’s advertising tier.

In Sydney, Netflix creatives were among the drawcards for South By Southwest.

On Tuesday, twice as many people turned out to see Drive to Survive co-creator Paul Martin as there was capacity in the (curiously small) room.

On Wednesday, SXSW put Black Mirror creator Charlie Brooker in the big auditorium and still had to turn people away. Among other things, he explained the in-joke of how he created the fake streaming service Streamberry for Black Mirror’s generative AI episode Jane is Awful.

Meanwhile, on Wednesday night, Seven ran its Upfronts as part of SXSW; also in front of several hundred guests. There were a few empty seats, but not many.

I’ll return to Seven’s announcements in more detail in tomorrow’s edition of Best of the Week, but one moment from the presentation spoke to the rise of the streamers. Early in the preso, Apple TV+’s Ted Lasso got a shoutout, with Seven arguing that its daily soap Home & Away has a reach that is three times bigger in Australia.

Subscription streaming TV certainly is one of the enemies for the free to air players to be concerned about, not just in the audience battle, but now for advertising too.

Yesterday, Netflix released its global results for the last quarter. It’s getting increasingly serious about ads.

A year and a half ago, the growth of Netflix subscribers stalled. So the organisation pulled two levers. It cracked down on password sharing beyond households, forcing freeloaders to buy their subscriptions. And it launched a cheaper ad-supported tier.

The changes worked. Yesterday Netflix reported it hit 247.15m paid memberships in the last quarter. It said that 30% of new subscribers are choosing the ad-supported tier

Challengingly for Netflix’s rivals, including the free-to-air sector, executives on yesterday’s earnings call made clear that they’ve barely begun to take its advertising proposition to market.

Co-chief executive Greg Peters said during the call that observers were trying to work out how much more juice Netflix has left to squeeze. The answer: Lots. “Scale is the number one priority,” he said.

For now, the Netflix partnership with Microsoft to sell its advertising is continuing, despite the prediction from S4 Capital boss Sir Martin Sorrell that “it’s a partnership that won’t last”.

Australia is one of the 12 counties where Netflix currently offers ads. Marketers will be offered targeting options “in the near future”, along with audience matching and better reporting. That includes measurement from Nielsen in the US. Presumably there will be similar offered in Australia too. More programatic options are also in the pipeline.

More of the audience will be nudged into the ad supported tier. Next week, Australian customers of the ad tier will be able to access two streams, and move to higher resolution. Next month, the ad tier will start allowing downloads for offline viewing.

Netflix has taken longer to gear up its ad sales than many observers expected. The person charge of the first run at it globally, Jeremi Gorman was moved on last week, after just a year at the helm. Her replacement is Amy Reinhart, a longtime Netflix executive.

The Netflix ad sales operation is yet to make an impact in Australia, where the company’s influence on the ad market has – until now – not been particularly noticeable. I’ve not seen a single trade marketing communication from them, and I couldn’t even tell you the name of the person in charge of selling Netflix ads locally.

It’s a familiar stage of the platform playbook. Ask the trusted insiders to lead the first stage of development, then eventually recognise that it’s harder than it looks and hire in more on-the-ground local talent.

Facebook and Google went through that stage a decade-and-a-half ago. Amazon Ads is doing something similar with its retail media play locally.

They’re coming though. Netflix’s serious local push for ad dollars is on the way.

Unmade Index back on the down escalator

Seja Al Zaidi writes:

The Unmade Index lost 1.21% and fell back to 615.2 points yesterday.

Enero Group had the biggest fall – 4.76%, while IVE Group dropped 3.48%. Domain fell 1.83%, Seven West Media 1.64% and Ooh Media 0.68%.

The price of Southern Cross Media, currently the subject of an ARN Media takeover bid, continued to rise – it lifted 2.89% yesterday.

Pureprofile rose 3.70%.

Time to let you go about your Friday.

I’ll be back tomorrow with Best of the Week. It’s been a big one, anchored around SXSW Sydney. Lots to talk about. I’m about to start writing it.

Have a great day.

Toodlepip…

Tim Burrowes

Publisher – Unmade