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LOS ANGELES, CALIFORNIA – JUNE 12: Netflix CEO Ted Sarandos attended Netflix’s “Squid Game” FYSEE event at Raleigh Studios Hollywood on June 12, 2022 in Los Angeles, California. (Photo by Charley Gallay / Getty Images for Netflix)

Charley Galley | Getty Images Entertainment | Getty Images

CANNES, France – With the launch of the world’s largest advertising conference this week, all eyes will be on Netflix for instructions on how to break free from the ad-free business model for the first time to offer a cheaper subscription.

Netflix CEO Ted Sarandos will end the week with panels at the Cannes Lions Festival on Thursday, returning from a two-year hiatus in the pandemic, and has named Sarandos “Entertainment Person of the Year.” “The demand for cheaper streaming subscriptions based on panel ads is expected to grow as inflation puts pressure on people to cut costs.

Attendees will also be looking for clues as to who Netflix will be collaborating with in the advertising world, and plans to start selling ads quickly in the fourth quarter. Sources told CNBC that Netflix has met with Google, which pulls most of its revenue from ads. He has also met with Comcast / NBCUniversal and Roku to discuss partnerships for ad sales, as reported by The Information. NBC Universal and Google declined to comment.

“We’re still starting to see how to launch an ad-supported option at a lower price, and no decision has been made. So this is all pure speculation at the moment,” Netflix said in a statement.

The company wants to get a marketing partner in the next two to three months and quickly hire a senior executive and form a team to manage its relationship with its partners, according to a source who requested anonymity.

Many of the festival’s attendees remember that the dollars of the ad were poured into streaming entertainment. In April, Netflix said it would offer a cheaper option with ads when it first reported losing subscribers, increasing competition in the streaming field. Sarandos’ speech in Cannes was scheduled before Netflix announced its next move.

Read more: Netflix rethinks ideas that made it unique

Disney + is also preparing to launch an advertising service this year. Paramount + has an ad-supported level and Pluto supports free ads. The new merger of Discovery Warner Brothers is expected with its combination of streaming services, and Roku, with its growing advertising business. CNBC’s parent company, NBC Universal, is also offering a cheaper ad subscription for its Peacock service.

The company must measure the advantages and disadvantages of each potential partner. Google, for example, has the advantage of being the largest advertising giant in the world, but has less experience with entertainment content in recent times.

Comcast doesn’t have the global reach of Google, but its NBC Universal unit is the leader in selling ads for this premium TV content. The giant cable Freewheel advertising technology platform is also used by many media companies and can provide Netflix with programmatic tools for buying ads. In addition, NBC Universal has recently expanded its partnership with Apple to sell its ads by setting a precedent for selling premium content ads on a scale.

Read more: Netflix’s binge-release model is under new scrutiny

Another option is Roku, a longtime Netflix partner that previously came out of the streaming giant. As the largest operating system in the U.S., Roku has advantages over its scale in the U.S., Canada, and Mexico, and has an insight into the subscription trends supported by the ads.

Potential partnerships would follow a long history of rivals coming together in the media industry. As a content distributor and entertainment company, for example, Comcast regularly enters into distribution agreements with its rivals NBC Universal. And Roku joins streaming apps while offering a free alternative to Roku Channel ads.

The stakes are high for Netflix. Its shares have dropped nearly 50% since it warned its subscriber base. Providing a cheaper advertising service is a way to keep track of cancellations as people seek to reduce costs, but Netflix needs to make sure that the advertising experience doesn’t go off.

Outreach: Owned by NBCUniversal on CNBC Comcast.

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