Ad-Supported Netflix May Launch This Year, Chicken Soup For The Soul Buys Redbox

1. Ad-Supported Netflix May Launch This Year

While most of the industry took Netflix’s announcement to start up an ad-supported tier as an “at some point” type announcement, an article in the New York Times this week, based on a leaked memo (a lot of that going around these days) seemed to indicate that Netflix may be looking to launch their ad business much sooner, possibly by the end of this year, with help from The Trade Desk.

Why It Matters

Netflix has the potential to be able to really shake up the CTV ad market due to its size, its perceived prestige and the perceived strength of its data.

Rather than outsource the advertising as if it was some necessary-but-unpleasant task like janitorial services, there’s a real opportunity to take the lead and remake CTV advertising, or at least portions of it. 

CTV advertising is something of a mess these days which is to be expected from any newly launched industry that is still finding its sea legs, but still…. 

Among the many issues are numerous walled gardens, a lack of transparency around ad placement, a disconnected array of datasets for targeting, limited consistency on ID resolution and privacy and a buying system that too often results in overdelivery to the same households.

And while many individual providers and OEMs have solved for this, the fact remains that it is very hard to buy CTV at scale, particularly when compared to traditional linear.

On a macro level, there’s also the issue that many advertisers remain skeptical of the value of all that data-driven inventory—they see value in reaching people outside of the target demo and their goal is to burnish the brand’s image in a way that might influence purchases several years hence, rather than sell a particular product today, a goal that is not very easily measured.

Depending on how Netflix goes about setting up their advertising division, they may be able to ameliorate many of these issues, or at least set standards that everyone else winds up following, which would have a similar effect. It would require hiring a team with enough vision to create those sorts of standards and to then explain why they benefit everyone in the ecosystem. But it’s certainly within the realm of possible.

What You Need To Do About It

If you’re Netflix, be as bold and forward thinking about advertising as you’ve been about everything else. Make some solid hires, people who have done this before on both sides—TV and programmatic. If nothing else, if you actually insist on being serviced by hybrid (TV and digital) teams at brands and agencies, that will be a big step forward. So find the Ted Sarandos of CTV advertising and bring them on board.

If you’re everyone else in the CTV ecosystem and Netflix actually does take a stand, consider supporting them. The easier it is to buy across multiple platforms and vendors, the more money advertisers will spend on CTV, which is a definite win on your end.

A rising tide lifts all boats and all that.

2. Chicken Soup For The Soul Buys Redbox

In one of the more interesting mergers this year, Chicken Soup For The Soul, the company that owns CracklePlus (among other streaming platforms) bought Redbox, the kiosk-based DVD-rental company that has also launched its own FAST service.

The result will be a very robust independent FAST consortium with a variety of offerings that can cater to a range of consumer moods and tastes, while providing much needed ad-inventory—and data—for the CTV ecosystem.

Why It Matters

There will be much more consolidation in the industry over the next few years, especially in the FAST market, where players not affiliated with either an OEM or a big broadcast network will need to join forces to survive.

The CSS-Redbox merger is interesting in that it combines a service (CSS) that owns a number of FAST services with primarily on-demand content like Crackle and Popcornflix, with one that that owns a primarily linear FAST service along with a robust streaming movie rental (TVOD) business. 

Better still, both have been dipping their toes into the original programming steam too.

Right now, as per this piece by my colleague David Bloom, it seems that the plan is to keep the existing services separate while combining forces for production and advertising. That makes sense in the short term, as the industry is still shaking out and as that approach has been successful thus far for CSS. 

That said, as the streaming business matures, I would not be surprised if they decided to roll everything up into one giant super-FAST with linear, AVOD and movie rentals as a way of planting the flag and increasing brand identity. There are arguments to be made for both trajectories and it will really depend on the state of the market as to which makes the most sense.

On a macro level, it’s been a good time to be a FAST service, as the mainstream media is waking up to the fact that they exist, have many fans and provide a great alternative to paying for streaming. 

And since perception is pretty much everything, that is bound to help. (Look for our TVREV Special Reports on the FASTs coming too to help continue that buzz.)

What You Need To Do About It

If you are Chicken Soup For The Soul, don’t get hung up on the linear vs on-demand thing. For consumers, if it’s free, it’s all pretty much the same. Remember, people have spent decades watching both linear and on-demand programming from their cable TV provider and don’t really see them as separate experiences. If anything, their main point of differentiation is going to be “TV I have to pay for” versus “TV I don’t.” And linear versus on-demand seems to be more a “Current Mood” thing and less of a Strongly Held Preference thing. Meaning don’t be afraid to mix things up some between all your various services. 

If you’re an advertiser, you’ve got a broad range of options from the newly merged companies that appeal to an equally broad range of audiences. Better still, the Redbox acquisition comes with a whole lot of data points that Redbox has been collecting over the years about consumer preferences, data that should be of particular use to media companies and movie studios.