Netflix and Disney poised to shake up TV ad world

Netflix has the potential to woo advertisers with hit original shows such as 'Stranger Things' in an ad-subsidized subscription tier the streaming television giant could customize in creative new ways.

A lower-priced Netflix subscription subsidized by ads promised to let marketers reach viewers where ever and when ever they stream shows, while more personally targeting messages.

With the launch of cheaper, ad-supported subscriptions, Netflix and Disney+ are expected to bite into the revenue of traditional television channels as the streaming services look toward continued expansion.

After having long-shunned the notion of advertising on its platform, Netflix thisyear accelerated work on just such an offering as inflation prompts consumers to spend less and competition in the streaming television market intensifies.

"These launches are going to create the biggest premium advertising space in more than a generation," said analytics company Samba TV senior vice president Dallas Lawrence.

The windfall for Netflix and Disney+ could be considerable. Market tracker Statista forecasts that spending on television ads globally will hit $159 billion this year.

Global video sharing and online television platform YouTube saw $28.8 billion in ad revenue in 2021.

"Now, we can see that is obviously not true."

But Netflix and Disney+ -- with 220 million and 152 million subscribers respectively -- throwing their hats in the advertising ring could catch the attention of businesses interested in reaching television audiences, analysts said.

When the time comes, Disney+ will transition its existing $7.99-per-month subscription tier to the ad-supported version, and the ad-free option will go for $10.99, the company has said.

Being able to reach Netflix or Disney+ viewers promises to help brands reconnect with audiences that have abandoned traditional "linear" television in favor of streaming entertainment, said nScreenMedia chief analyst and founder Colin Dixon.

No matter when viewers with ad-based subscriptions choose to watch a show or film, the commercials will be there, waiting for them.

These new subscription tiers will put pressure on linear television service providers that have not yet entered into the streaming game, analyst Lawrence said.

"When Netflix and Disney+ unlock that capability and allow advertisers to access the most premium inventory available on televisions, we're going to go to a full stampede out of linear television and into streaming environments," said Lawrence of Samba TV.

Along with reaching viewers wherever and whenever they stream television shows, ads on Netflix or Disney+ can provide marketers with more data than is available from what Samba called "old-fashioned TV," he added.

And, Netflix and Disney+ have a chance to create new advertising models, breaking long-held norms about advertising length or placement, and even involving partners in program creation.

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