A longtime comrade in arms gave some feedback on my recent post regarding Netflix’s announced pivot to an ad-supported streaming option and the challenges they will face in getting into the game significantly enough at a stage when so many competitors are already in it or far more prepared to do so. (I actually was reacting to Kevin Mayer’s opinion– as one of the architects of Disney Plus I have a hunch Kevin knows a thing or two about building streaming service value).
That said, Bruce Lefkowitz is no mere comrade; he headed FOX ad sales efforts for more than a decade and was a senior sales executive for Discovery and Turner before that, who were far and away considered the best in class among cable networks on Madison Avenue in the day. Buyers willingly would pony up higher costs per thousand to be in those shows and on their networks because they were ones they tended to watch (or wanted to) and most of their content was considered high quality, making it easier to sell into their clients.
So when Lefko says this : Banger. It will be interesting to see what currencies they choose to transact on and whether they grade their own papers. That said, we can debate unique content but what they can do is increase supply in a market that continues to shrink. Don’t sleep on this move, if they do it right big media will feel it I believe–well, I for one pay attention
Despite all of the success the FX we worked for had as a content creator it suffered from the same stigma that most FOX-branded content outside of sports has tended to have– sometimes controversial subject matter that can make some advertisers squeamish. Lefko and his team were able to calmly and rationally bat down those barriers, countering every biased opinion with facts, or at least the version my team and the New York-based support team we both worked with would arm them with. 
And this is where Netflix can borrow from a previously successful playbook to not only help their own efforts, but also impact what its competition can generate from it. Media sales is not a zero sum game. Advertisers almost always have a goal to reach a certain number of people over a certain period of time , ideally spending as little as possible to reach those they believe will be the most likely to purchase their product. Whatever inventory Netflix can add to the ecosystem WILL be more than likely perceived as high quality for many of the same reasons the FX we added to the marketplace in the oughts cited. Critical acclaim. Shows you likely watch or wish you would. Acquired titles you know and, more importantly, your clients know. No buyer would ever have to justify including a Netflix title on their wish list.
And as for content: well, I have my own thoughts on exactly how rigid buyers are about that. My first professional job was buying time on local TV stations, where our sole goal was getting the best possible “cost-per-thousand”. When THREE’S COMPANY reruns debuted on local TV stations, initially many of my agency’s clients included it on a “no buy” or “qualified buy” list we were under edict to follow. Even though a lot of these advertisers purchased time on the show when it aired at 9 PM Eastern on ABC, for parochial reasons when the show would air at 6 PM or earlier it was considered an “inappropriate” environment.
But THREE’S COMPANY was demographically ideal for success in syndication–it attracted a lot of women, disproportionate amounts of men for a late afternoon time period and, yes, lots of teens and kids. (Have you actually analyzed the level of humor the show used?!!). So, of course, it premiered as the highest-rated newly available show, and in many markets shifted the competitive landscape markedly. Trying to efficiently buy around it was a fool’s errand. Stations frustrated by their inability to sell ads were offering significant discounts just to get a piece of our budgets, because there are long-term benefits to taking money and sales units away from competitors.
It all made too much sense. Eventually the siren’s song of efficiency won out over the initial moral compass reactions to rejection. We started buying the show and yes, once we were in and satisfied we paid more later on.
FX’s numbers were excellent on many of the same barometers that advertisers coveted, and Lefkowitz and his team employed a similar battle plan. Take the initial hit on CPM where necessary, make your client a hero with your performance, keep a few GRPs away from your competition and make up the shortfall going forward.
There is no question Netflix has the ability to do just that assuming they do get to scale. Yes, it will be a challenge to get a threshold like 30 million unique ad-enabled subscribers, but given the hundreds of millions of accounts they are working with, among many of which are contained unique households headed by adults who may choose the ad-supported tier as a cost compromise, their challenge is at least one of keeping what you have versus getting what you don’t.
They also have one other advantage. They already have in place a “1P” measurement platform with a scale exponentially superior to Nielsen’s. Few informed observers question the legitimacy of Netflix’s measurement. What is an open question is whether the metrics they generate meet the demands of the advertiser. Are the qualifications about their age, gender and household income accurate? Will the ad-supported subset of Netflix be representative of their existing overall subscriber base? Will their data indeed get certified by the Media Ratings Council?
Netflix faces many of the same opportunities and challenges our FX team faced. Facts and persistent salesmanship overcame lots of them, and the crown jewel that Disney purchased in 2019 was largely forged as a result of our efforts to educate the buying ecosystem of them. Even before Netflix worries about how much of the revenue shortfall their discouraging subscriber projections foretell, they need to worry about who they will bring in to translate their data and their value proposition to the needs of those determining who gets bought and for how much.
I’ll smugly but accurately add they could do a lot worse than to bring in people like Bruce Lefkowitz and myself to at least help them get the ball rolling.
Until next time…
1 thought on “Netflix and Chillier–Maybe Try to Be NetFX?”
FX was a carried network because it was part of the Fox bundle when we operator’s negotiated. Netflix has a one to one relationship with viewers. Netflix is in a harder position. They worry about viewership and churn. I agree with your comment that there are too many over the top services and too much content and a shrinking market. Just like pay cable.