Walt Disney Co., Netflix’s biggest competitor in paid-video streaming, is also working on an ad-supported version of its flagship service, Disney+. Hulu, majority owned by Disney, already has a version with commercials.
Both Disney and Netflix plan to show fewer ads online than viewers see on live TV or in most streaming services. They also hope to charge higher prices than the industry standard. Disney is more reliant on kids programming than Netflix.
Children’s programming presents a particular challenge when it comes to advertising. Google and YouTube had to pay $170 million for violating kids privacy laws. Netflix will show kids programs in its news service without the commercials and could, at some point down the line, decide to introduce ads.
Movies present a different challenge. Most filmmakers don’t want to make a movie that debuts with ads interrupting the story. Movie theaters run spots before new movies but not during them.
Netflix can still generate plenty of money without showing ads in the majority of its programming, according to industry experts. The company has a large pool of potential viewers and is known for having high-quality programs, such as “Stranger Things,” “Bridgerton” and “Squid Game.” HBO Max doesn’t show ads during any HBO programs, including series such as “Game of Thrones” and “The Sopranos” that were originally released without commercial breaks. Netflix may go back and insert ad breaks into some of its original series that have previously appeared without such interruptions.
Microsoft Corp. will handle the technology and sales for advertising in Netflix, at least initially. If it grows into a large enough business, Netflix will likely build its own ads-sales operation. The company is already looking to hire salespeople and an executive to lead its advertising-supported service.