Netflix is in talks with multiple ad-tech partners as the streaming giant pursues a plan to counter sluggish subscriber growth with less expensive, ad-supported options.

While Netflix apparently will seek to buy ad-tech to get its plan off the ground, the company is also keeping the door open to building its own ad business, Ted Sarandos, Netflix's co-CEO, suggested at this week's Cannes Lions conference in France.

As for potential near-term ad-tech partners, The Wall Street Journal reported this week that Comcast's NBCUniversal and Google are among the top contenders to nab that piece of Netflix's business.

Figure 1: Netflix has yet to reveal expected launch dates or pricing on any new ad-supported tiers. In the US, Netflix currently sells three subscription levels: Basic for $9.99 per month, Standard for $15.49 per month and Premium for $19.99 per month.
(Source: Netflix)

"We are still in the early days of deciding how to launch a lower-priced, ad-supported option and no decisions have been made," Netflix told the paper.

Sarandos also isn't naming names, but confirmed that Netflix is looking far and wide about how to get into the advertising act. He acknowledged that Netflix is leaving "a big customer segment off the table" by not marketing a cheaper, ad-supported version of the service.

"We're talking to all of them right now," he said with respect to potential ad-tech partners. "We want a pretty easy entry to the market – which, again, we will build on and iterate in … What we do at first will not be representative of what the product will be ultimately. I want our product to be better than TV."

If the ad model ultimately becomes important enough for Netflix to want full control, the company "might" build its own platform, and do it in a way that is "more integrated and less interruptive" than traditional TV advertising.

Sarandos declined to comment on rumors that Netflix might make a play for Roku, the streaming specialist that makes media players, software for integrated smart TVs and a growing advertising business of its own. "We don't need it," he said.

Netflix's exploration of an ad-supported model entered the picture in April after the company lost 200,000 streaming subs in Q1 2022 – its first subscriber loss in years. At the time, co-CEO Reed Hastings said Netflix was now "open" to creating a lower-priced, ad-supported tier.

An ad-supported tier might help Netflix pursue a part of the population that can't afford the current set of ad-free subscription tiers, but the move also stands to cannibalize part of Netflix's existing base.

Playing catch-up

Whatever the case, Netflix will find itself in the foreign position of fast-follower, trying to catch up to premium streaming competitors, such as Hulu, HBO Max, Peacock, Paramount+ and (soon) Disney+, that already offer ad-supported options. The market is also flooded with free, ad-based services that include Fox-owned Tubi, Comcast's Xumo and Paramount Global's Pluto TV.

But even if Netflix is late to the ad party, some industry observers think there's still time for the company, which has a global base of 221 million streaming subs, to make up for lost time.

"I don't think it's too little, too late," Colin Dixon, co-founder and chief analyst at nScreenMedia, told Light Reading recently. "If I'm an advertiser, I totally want to reach that audience."

Related posts:

— Jeff Baumgartner, Senior Editor, Light Reading