New Delhi

Amazon has significantly disrupted Netflix’s advertising plans by converting its entire Prime Video subscriber base to an ad-supported version. This shift is providing customers the option to return to ad-free streaming for an additional $2.99 a month. This move has introduced a substantial amount of ad inventory into the market, impacting negotiations for ad placements across various platforms, including Netflix, YouTube, and traditional TV networks.  

Advertisment

The introduction of Amazon Prime Video’s ad-supported tier has driven down ad prices across the board. Netflix, once charging $39 to $45 per 1,000 viewers, has had to reduce its rates to around $29 to $35 to stay competitive. This adjustment aligns more closely with Prime Video’s pricing, which is also under pressure from advertisers seeking even lower costs.  

To maintain its competitive edge, Netflix has not only lowered its ad prices but also embraced new advertising strategies. One such approach is product placement within its shows, allowing advertisers to integrate their products and services directly into the content. An example of this is the upcoming drama series about bull riding featuring Tim McGraw, which will include such integrations. Additionally, Netflix is offering larger sponsorship deals for live events and in-person experiences tied to its programming, aiming to attract more premium ad dollars. 

Prime Video’s ad-supported tier boasts an impressive reach of 115 million monthly viewers in the U.S., providing Amazon with a vast amount of ad inventory. In contrast, Netflix’s ad-supported tier reaches 40 million global monthly active users, a significant increase from the 23 million reported in January. Despite these numbers, Netflix’s programming is often more popular and generates more buzz, making it an attractive option for advertisers. 

Advertisment

Amazon’s entry into the connected TV (CTV) advertising market has been described as a significant disruption. With premium content, live sports, and immense scale, Amazon offers advertisers the ability to target ads effectively and track whether viewers purchase the advertised products on the platform. This capability, combined with its large reach, positions Amazon as a formidable competitor in the ad market. 

The ongoing upfront negotiations, where advertisers commit billions of dollars for commercial time for the upcoming TV season, are influenced by Amazon’s aggressive pricing strategy. Ad-holding companies, which manage large ad budgets, are currently vying for Amazon’s ad-buying account, often promising significant ad time commitments to win the contract. This situation is likely to further pressure ad prices downward. 

Despite the current price competition, the CTV advertising market is expected to continue the growth momentum. eMarketer predicts that CTV spending will reach $30 billion this year, with an annual growth rate exceeding 20 per cent in the coming years. This growth indicates that there remains substantial revenue potential in this sector, even as individual ad rates fluctuate.