More streaming services consider inserting advertisements
The two titans of the video streaming wars — Netflix and Disney+ — have long resisted commercials, showing a reluctance to have premium series like Stranger Things or The Mandalorian run alongside commercials hawking dish soap, soda and medications.
“No advertising coming onto Netflix — period,” Reed Hastings, one of Netflix’s co-chief executives, said several years ago, a point of view he repeated for some time.
“We don’t believe that the consumer experience would be a particularly good one if we had advertising on Disney+,” Christine McCarthy, Disney’s chief financial officer, said in late 2020.
But now, the streamers are starting to come around on Madison Avenue.
With the pandemic-induced surge of subscriptions showing signs of waning, major media and tech streaming companies are beginning to get bullish on advertising. To reach more people — including those made cost-sensitive by high inflation and subscription overload — streamers are offering a deal: exposure to ads in exchange for lower prices.
Last week, Amazon doubled down on its free, advertising-supported streaming service, renaming it Freevee from IMDb TV and announcing plans to expand its programming budget. HBO Max began showing ads over the summer and, since January, has had the same number of people subscribe to the commercial version as to its ad-free tier.
But the reevaluation has been even more surprising at Netflix and Disney.
“Never say never,” Spencer Neumann, Netflix’s chief financial officer, said last month about the possibility of advertising coming onto Netflix. The comments, though noncommittal, were enough to send investors and analysts, who had been questioning whether raising warning flags about the company’s slowing subscription growth, into a tizzy.
Disney has been even more abrupt in its change of heart. In March, Disney the company announced that it would introduce a lower-price advertising tier to Disney+ this year, explaining that it would be a “building block in the company’s path to achieving” its subscription targets.
“When the streaming businesses started and the pricing was in the midsingle digits, there was no room or need because pricing was competitive and low enough,” said JB Perrette, the president of global streaming at Warner Bros. Discovery, the new parent company of HBO Max. “But content is expensive, and as the pricing for ad-free tiers has gone up — in the high teens level on some of these packages, and even Netflix moving up — it has to be paid for.”
Some executives said advertising’s arrival was inevitable, as the streaming industry’s offerings increasingly mirror what has been available on television for decades: a mix of broadcast, basic cable with commercials and premium ad-free services.