Netflix ad model more complicated than it looks, says Seven boss

Seven West Media boss James Warburton says he is skeptical of Netflix’s plans to introduce an ad-supported subscription model, warning that rollout would be costly and difficult due to the way production studios distribute content around the world.

Netflix chief executive Reed Hastings says the streaming giant will start exploring a cheap, ad-based option after the pandemic darling reported its first drop in users in more than a decade last month. last. Warburton, who spoke about the TV business last week, said several factors at play made the plan difficult.

Netflix’s exploration of an ad-supported model is more complex than it appears.Credit:Screenshot

“It’s easy to say, it’s very complex to deliver,” he said. “What I’m skeptical about is how quickly this will happen. Deployment would be exceptionally expensive and would take a long time to repay. »

Production studios generally grant rights to TV programs and movies to two types of online video services: platforms with advertisements such as 7Plus or 9Now, and paid products such as Netflix, Stan and Paramount. That means there are shows that Netflix can’t keep – at least in the short term – if it switches to an ad-supported model, as its contract only covers programs that are behind a hard paywall. .

“For content owned by Netflix, they have full rights,” Warburton said. “But all other content that doesn’t come from Netflix, in the vast majority of cases, is sold in both windows – an ad window and a subscription window. There are about three or four properties that we have the rights to for several years that are available for free on 7Plus, and they are also available on Netflix.

Netflix’s plans to bring advertising to its service surprised this market given that it was once fiercely opposed to the idea. But even local streaming players are also considering it as the cost of content is rising as the industry hits its peak customer base.

A Deloitte report last December predicted that at least 150 million streaming subscriptions would be canceled globally in 2022 with churn rates of 30% for each market.

Nine boss Mike Sneesby, a friend of Netflix boss Reed Hastings, said last month ‘never say never’ about having Stan publicity, but said the company’s free streaming service 9Now was already hosting ads and the company wanted to differentiate between the two. platforms. It’s a different stance than the one taken in 2020 when Stan launched his sports arm and said there would be “absolutely no advertising.”

Sneesby said last month that Nine (the owner of this banner) had considered inserting a component of Stan’s content on an ad-supported level, while another option was to use the 15 million dollars. Nine users to generate data for advertisers.

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