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Analyst: Netflix, Prime Video Well-Positioned to See Revenue Gains From Advertising Later This Year Media Play News

April 3, 2024

With Netflix about a year into offering ad-supported paid streaming, and rival Prime Video joining the fray in January, new data from Wedbush Securities suggests the two streamers could see positive revenue from advertising by 2025.

The Wall Street firm recently hosted a forum featuring advertising executive Sean Adams with GumGum, a platform for advertisers that provides intel, ad creatives, measurement, and optimization for online ad campaigns.

Adams expects that the growth of ad-supported video-on-demand (AVOD) distribution, increased programmatic ad buying, and advancements in ad measurement effectiveness to drive continued growth in the sector.

The executive contends that Netflix’s $6.99 monthly ad-supported SVOD option is gaining traction among consumers as it expands its capabilities by developing partnerships beyond Microsoft (i.e. Amazon’s CTV platform) that enhances its ability to analyze consumer data, and offer more refined measurement and return on investment to marketers.

“The Netflix ad tier has to drive at least $9.66 in monthly-per-user ad revenue to be financially accretive,” Wedbush wrote, adding that it expects the streamer to generate $8 in average revenue per user by the fourth quarter.

“Netflix appears to be developing partnerships across a variety of CTV platforms, including Google/Android, Roku, Samsung, Vizio, and LG, among others,” read the report.

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E-Marketer recently published its latest U.S. connected TV ad spending growth estimates, which project 19% year-over-year revenue growth from 2023, and double-digit annual growth until 2028.

Adams believes Prime Video is starting its ad-supported streaming platform with “significantly more” ad-supported subscribers and inside data than Netflix, based the Amazon’s global Prime ecommerce platform.

“We think the Prime Video opportunity could result in $6.5 billion in
incremental advertising revenue for Amazon globally, while eMarketer estimates Prime Video ads could generate $3.88 billion by 2025 in the U.S. alone,” Wedbush wrote.

“As CTV offers more intelligent ad placements and analysis than traditional television, CTV ad spending is catching up and should surpass traditional TV by the end of the decade,” says Adams. “We think the proliferation of free ad-supported TV (FAST), along with sports increasingly shifting to over-the-top (OTT) options will accelerate the shift of ad dollars.

Indeed, both Netflix and Prime Video are approaching live sports, with the latter heavily invested in the NFL’s “Thursday Night Football,” among other sports. Netflix in July will live-stream an exhibition boxing match between former heavyweight champ Mike Tyson and cruiserweight Jake Paul.

Netflix reports first quarter (ended March 31) fiscal results on April 18.

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Erik Gruenwedel

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