Netflix Talks Google About Ads As Sarandos Set To Address Cannes This Week

LOS ANGELES, CALIFORNIA – JUNE 12: Netflix CEO 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)

Charley Gallay | Getty Images Entertainment | Getty Images

CANNES, France — As the world’s biggest advertising conference kicks off here this week, all eyes will be on Netflix to find out how the streaming giant plans to break away from its ad-free business model to offer less subscription for the first time. dear.

Netflix co-CEO Ted Sarandos is set to cap off a week of panels with a talk Thursday at the Cannes Lions festival, which returns after a two-year hiatus during the pandemic and named Sarandos its “entertainment person of the year.” . The panel comes as demand is expected to rise for cheaper, ad-supported streaming subscriptions as inflation pushes people to cut costs.

Attendees will also be looking for clues about Netflix’s partners for its foray into the world of advertising, which it plans to rapidly accelerate to start selling ads as early as Q4. Sources told CNBC that Netflix met with Google, which derives most of its revenue from ads. He also met with Comcast/NBCUniversal and Roku to discuss ad sales partnerships, as previously reported by The Information. NBC Universal and Google declined to comment.

“We are still in the early days of deciding to launch a cheaper, ad-supported option and no decision has been made, so this is just speculation at this stage,” Netflix said. in a press release.

The company is looking to find a marketing partner within the next two to three months and quickly hire a senior executive and build a team to manage the relationship with its partners, according to a source who requested anonymity.

Getting ad dollars flowing into streaming entertainment is a priority for many festival-goers. In April, Netflix announced it would offer a cheaper ad-supported option after reporting the loss of subscribers for the first time as competition in the streaming space intensified. Sarandos’ conference in Cannes was scheduled before Netflix announced its next move.

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Disney+ is also gearing up to launch an ad-supported service later this year. Paramount+ has ad-supported tier and Pluto free ad-supported. The newly merged Discovery Warner Brothers with a combination of its expected streaming services, and Roku, with its growing advertising business. CNBC’s parent company, NBC Universal, also already offers a cheaper ad-supported subscription for its Peacock service.

The company will have to weigh the advantages and disadvantages of each of the potential partners. Google, for example, has the advantage of being the world’s largest advertising giant, but has less experience with entertainment content despite its recent push into the space.

Comcast doesn’t have the global reach of Google, but its NBC Universal unit is a leader in selling ads for this premium TV content. The cable giant’s Freewheel ad technology platform is also used by many media companies and could offer Netflix its programmatic ad buying tools. Additionally, NBC Universal has just extended its partnership with Apple to sell its ads, setting a precedent for its partnership to sell ads for premium content at scale.

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Another option is Roku, a longtime Netflix partner that was previously part of the streaming giant. As the largest TV operating system in the United States, Roku has the advantage of its scale in the United States, Canada and Mexico and its knowledge of ad-supported subscription trends.

The potential partnerships would continue a long history of rivals teaming up in the media industry. As a content distributor and entertainment company, for example, Comcast regularly strikes distribution deals with competitors to its NBC Universal. And Roku partners with streaming apps while offering its own free, ad-supported alternative in the Roku channel.

The stakes are high for Netflix. His stock is down almost 50% since he warned of shrinking subscriber base. Offering a cheaper ad-supported service is one way to prevent cancellations from continuing as people look to cut costs, but Netflix needs to make sure the ad experience won’t turn viewers off.

Disclosure: CNBC is owned by Comcast’s NBCUniversal.

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