Netflix it is returning part of the money to advertisers for not meeting the promised audiences in the advertising contracts of the basic plan with ads, reaching in some cases approximately 80 percent of the expected audience.
The content platform launched the basic plan with ads in Spain on November 10, which reduces the price of entry to the platform to 5.49 euros per month (2.5 euros less than the basic plan). In exchange, it includes advertising, decreases playback quality, and removes some of the most viewed titles from the catalog.
This new subscription plan is not reaching the number of views per ad that had been agreed with the advertising companies, remaining around 80 percent of the estimate. A slow debut in the growth of users that has forced it to refund money for ads not displayed,according to the statements of five agency executives collected by the American magazine Digiday.
Nevertheless, not all advertisers have requested to recover their money. Those who have it back have been companies that were carrying out marketing campaigns specifically scheduled for these dates and have wanted to reallocate this expense. However, other companies have opted for move that investment to the first months of 2023trusting that the audience will continue to grow until the guarantees agreed by then are met.
Netflix’s advertising deal system is based on a payment on demand where advertisers pay for the estimated amount of reach for their ads, and if that amount is not reached, Netflix would release the unspent ad dollars at the end of the quarter.
In addition, Netflix is the most expensive platform in this sector to invest in ads. The platform initially charged $65 for every thousand ad views, while Disney+, what talso launched its subscription plan with ads on November 7, it is priced at $50. Now, even though Netflix has lowered the price to $55, it’s still more expensive than its rival.
Returning to advertisers leaves Netflix in a bad spot. However, agency executives argue that it may be a “symptom of how quickly the company launched that business“, rather than a sign of Netflix’s long-term prospects.
Likewise, the platform continues to seek advertising agreements for 2023, as detailed by the executives, who also do not rule out that, in order to achieve them, Netflix will have to lower the price further per ad.