Report: Netflix in Talks with Roku, Comcast to Partner on Advertising Tier
Last week, curious rumors began to circulate that there was a possibility that Netflix could be looking into purchasing smart TV operating system and advertising hub company Roku in an effort to solidify its upcoming ad-supported tier. While a number of analysts doubted the veracity of the report due to regulatory concerns and recent financial concerns, they did believe that a partnership was possible between the two streaming giants, especially given that Roku was originally developed as a Netflix project.
Now, according to reporting from The Information's Jessica Toonkel, it appears that a partnership between the two companies is very much a possibility. Toonkel reports that Netflix has had discussions with both Roku and cable giant Comcast “to discuss arrangements under which those companies would handle either the ad sales or the technical infrastructure of Netflix’s forthcoming ad-supported tier of service.”
Netflix has steadfastly avoided advertising since launching its streaming service in 2008, so in order to ramp up the lower-priced option by the end of the year, the company would need to build — or outsource — an entirely new advertising operation. The same is not the case for Disney+ — which also aims to introduce an ad-supported subscription option in 2022 — as the streamer already has deep advertising connections in both broadcast and streaming via its corporate siblings at ABC, multiple cable networks, and Hulu.
“We are still in the early days of deciding how to launch a lower-priced, ad-supported option, and no decisions have been made. So this is all just speculation at this point,” a Netflix spokesperson told The Information.
While it might seem strange for the world’s largest streaming service to partner with rivals in an effort to grow its subscriber base, as streaming continues to evolve, so do the relationships between the major players. Toonkel notes that while Comcast owns Peacock, its Freewheel advertising platform runs operations for Paramount, and Google — which owns YouTube — works with Disney’s myriad streaming services.
The Information’s report did not yet indicate that any deals were imminent, but it would seemingly be to Netflix’s benefit to finalize partnerships as soon as possible. The streamer is currently planning on launching pre-roll ads in the fourth quarter of 2022, so the company needs to begin putting plans in place soon in order to have enough time to sell ads for launch. Making the further expansion of their ad-supported plans more difficult is the fact that until the pivot was announced, Netflix had only optioned the rights to ad-free streaming on its licensed content.
Therefore, it is expected that for the streamer to secure both the ad-free and ad-supported streaming rights, Netflix will need to pay out an additional 20% on average. Given the anticipated revenue increases that analysts are projecting from the ad-supported tier, that would seem like a worthwhile investment for the streamer.
While it appears that Netflix is still attempting to work out how its advertising operations are going to work, it is clear that after nearly a decade and a half, the company has committed to advertising in a way that gives consumers options.
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.