Netflix showed off impressive numbers coming out of its upfront negotiations last week. But the ad industry remains less-than-impressed with Netflix’s lack of transparency.
During its second-ever upfront, Netflix says it saw 150% year-over-year growth in commitments. But the streamer declined to share dollar amounts or specific percentages regarding where its commitments came from or what they’re earmarked for. Netflix also didn’t offer a base number for its upfront commitments last year, making it nearly impossible to put the reported growth in perspective.
This lack of transparency – and believe me, I did ask for a number – sparked a somewhat heated discussion on LinkedIn. The conversation, started by Evan Shapiro, a self-described “media universe cartographer,” stemmed from AdExchanger’s recent coverage of Netflix’s upfront results.
When publicly traded companies tout such significant growth, they “must be transparent and include the supporting points,” Sandra Lopez, an investor and media vet, wrote in response to the post.
Amazon also just announced the close of its first-ever upfront. The ecommerce giant didn’t disclose a dollar amount of commitments or its CPMs.
Meanwhile, NBCUniversal, Disney, Warner Bros. Discovery and Paramount announced consistent year-over-year growth with a jump in commitments for streaming in particular. Unlike Netflix, the broadcasters also highlighted specific percentages of growth for sports, multicultural programming and investments from small and midsize businesses (SMBs).
The Netflix walled garden
Despite the industry critiques over Netflix’s lack of transparency, the streamer is fortifying its garden walls and further limiting the amount of information it shares publicly about its nascent advertising business.
In April, for example, Netflix shared that it will no longer report quarterly subscriber numbers starting next year. Naturally, that decision sparked doubt over subscriber growth for the platform’s ad-supported tier, introduced in late 2022. As of May, Netflix had 40 million monthly active users, which are individual profiles within a smaller (and undisclosed) number of paying household accounts.
Considering Netflix’s protectiveness over its subscriber numbers, it’s unsurprising that Netflix’s upfront results announcement is also opaque.
While ad sales growth of 150% sounds impressive, Netflix is only in its second year of selling ads, so it’s not yet a mature business with consistent year-over-year growth. Plus, without any hard numbers, there’s almost no way to know how this growth translates into actual ad dollars.
The more important number to pay attention to is Netflix’s CPMs, according to media and agency vet Danny Weisman, writing in response to Shapiro’s original LinkedIn post. Earlier this month, Netflix dropped its CPMs to just under $30, down from between $39 and $45 last year. The new prices are a far cry from the $65 CPMs Netflix was charging when it first launched ads in 2022.
Lower prices may dilute the overall value Netflix is getting from the upfront deals it recently closed, Weisman wrote.
Netflix had to lower its CPMs to compete with other digital giants, namely Amazon’s Prime Video, which defaulted its subscribers to ads earlier this year. Prime Video has roughly 200 million US subscribers with CPMs hovering around $30.
Netflix may be Netflix – as in, a byword for premium – but most media buyers making upfront commitments are also looking for platforms with scale, competitive pricing and transparency.
Broadcasters brandish their numbers
In contrast, legacy broadcasters like Disney, NBCU, WBD and Paramount are providing more transparency into their upfront deals to prove they can excel where Netflix lags: scale.
NBCU boasted that its content portfolio reaches 273 million people each month, representing a far bigger audience for advertisers than Netflix.
As for ad sales growth, NBCU has seen a consistent 40% increase in demand year-over-year for the past three years. Disney’s streaming ad commitments rose 10% since last year, and for WBD’s streaming service Max, that number was 50%. In Paramount’s case, it boasted $1 billion in spend commitments specifically for streaming.
Although most programmers didn’t share specific dollar amounts for their commitments this year, similar to Netflix, they at least shared percentages or ranges that highlight specific growth areas, which Netflix did not.
Sports was also a bragging point for these four broadcasters. NBCU, Disney and WBD all announced double-digit percentage growth in commitments for sports. Netflix also highlighted its deals for live events, such as WWE Raw and the Christmas Day NFL games.
NBCU shared more information specifically regarding small and midsize advertisers, which most programmers are trying to win over with easy-to-use self-serve ad platforms. NBCU’s SMB growth division grew 50% since last year, and within that group, ad investments in sports jumped 90%.
Netflix, on the other hand, shared no specifics regarding spend commitments for sports or from SMBs.
It certainly pays to be transparent. But the question I still have is this: Will transparency be enough to help legacy broadcasters win the streaming wars against Netflix?
Update 9/03/24: This story has been updated to include Amazon’s upfront close.
