Even though Netflix has made it clear that ads are not on the horizon, their competitors think they eventually will have no choice but to include them. On a panel at Cannes, Peter Naylor, Hulu’s Head of Ad Sales, and Linda Yaccarino, NBCU’s Ad Chief said the high cost of originals, combined with the growth of ad-supported services will lead Netflix to start including ads.
According to NBCU’s Yaccarino, “When you have to make more programming that’s not guaranteed to be a hit — the price will go up for the subscription, and it would be logical to mitigate those increases to take ads.” But what those ads look like may not be what we’re used to today.
“The future of ad-supported media does not resemble what we’re doing today in terms of ad load or even ad shape,” according to Hulu’s Naylor. “It can be interactive advertising or nonintrusive advertising. I think you’re going to see a lot of innovation from all of these new OTT providers because we’re allowed to.”
With streamers hoping for higher CPM’s from addressable advertising, they may be able to improve the experience for consumers with more targeted ads — with less frequency. Hulu is now capping ads blocks during shows to just 90 seconds, down from 180-240 seconds. Naylor says, “We’re not married to the clock. Fifteen and 30-second ads were a product of linear TV. When everything’s on demand and served through an IP address, the ad experience is going to dramatically improve.”
For Netflix though, the revenue from ads may be too hard to pass up. 70% of Hulu subscribers pay for their Limited Commercials plan ($5.99) — which generated $1.5 billion in ad revenue in 2018. So while nothing is imminent for Netflix subscribers, it sure seems like their competitors think that an ad-supported version of Netflix is all but inevitable.