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Analysis: Netflix to Add $4 Billion in U.S. Advertising Revenue

Joshua Thiede

Cord-cutters may not be able to avoid commercials for much longer! If analysts are correct, Netflix should be rolling in advertising revenue once its ad-supported video-on-demand (AVOD) subscription tier goes public. According to a new study by LightShed Partners, the streamer may be looking at upwards of $4 billion in ad revenue thanks to “time spent” watching its service.

The analysis takes a look at “time spent,” or how long viewers actually have streamers on-screen. LightShed believes that companies should focus on this metric as it directly affects their chances of acquiring advertising partners. An AVOD platform won’t be as attractive to advertisers if their ads hardly play on the service, and increasing viewer engagement will make AVOD tiers a safer bet.

Netflix currently keeps the most eyes glued to the screen with a 29% share of total time spent, representing approximately 3 billion hours domestically. YouTube comes in at a relatively close second with a 21% share (2.2 billion hours) while Hulu was the only other service to hit double digits at 12% (1 billion hours). As for exclusively AVOD services, YouTube comes in first, but Hulu retains a respectable second with a 20% share. There wasn’t any other service that rose above 5% in the AVOD market.

These numbers should make streamers wary as a lack of data may keep advertisers at bay, at least for the time being. Due to a lack of AVOD service availability, there is little impetus for advertisers to make the switch from linear cable and satellite providers to over-the-top (OTT) streaming-exclusive options. When larger companies such as Netflix finally enter the AVOD market, a 29% share in viewership may be enough to spark some interest.

The LightShare study predicts that Netflix’s stance as a leader in the “time spent” metric puts it in a position to earn over $4 billion in ad revenue. If an estimated 40% of its current subscribers shift to an AVOD tier, the streamer may be looking at outpacing Hulu to become second place under YouTube in terms of AVOD options alone. Even so, a recent survey from Whip Media indicates that only around a quarter of Netflix subscribers would choose to make the switch, a substantial difference from LightShare’s estimations. However, Whip’s numbers didn’t account for new customers that could come to the service thanks to the lower-priced option.

Meanwhile, Disney looks to only rake in a $1 billion with its forthcoming ad-supported tier thanks in part to a lower age demographic. These numbers aren’t a good sign for the House of Mouse as it recently learned its in-company competitor, Hulu, is more popular in some metrics than its flagship platform.

Continued reports show that Netflix is going to make a comeback with its AVOD tier, and LightShare’s data supports big financial gains for the streamer.

As ad-supported subscriptions gain in popularity thanks to their lower monthly costs, viewers looking to avoid commercials might find ad-free TV a very expensive prospect.

Netflix

Netflix is a subscription video streaming service that includes on-demand access to 3,000+ movies, 2,000+ TV Shows, and Netflix Originals like Stranger Things, Squid Game, The Crown, Tiger King, and Bridgerton. They are constantly adding new shows and movies. Some of their Academy Award-winning exclusives include Roma, Marriage Story, Mank, and Ma Rainey’s Black Bottom.

Netflix offers four plans — on 1 device in SD with their “Basic with Ads” ($6.99) plan, on 1 device in SD with their “Basic” ($9.99) plan, on 2 devices in HD with their “Standard” ($15.49) plan, and 4 devices in up to 4K on their “Premium” ($19.99) plan.

Netflix spends more money on content than any other streaming service meaning that you get more value for the monthly fee.

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