Why Netflix’s binge-watching model could impact its advertising prospects

Netflix’s binge model, packing the service with instant-gratification new releases and syndication-style reruns, has become a common consumer behavior in the age of digital video. But the streamer’s setup could turn against it as it enters the world of advertising, as brands consider the pros and cons of marketing to viewers who speed through series. The streaming world broadly has come under scrutiny over the past year for its growing rate of churn, or the number of subscribers that leave a service, as profitability slows, competition heightens and consumer subscription fatigue grows. The average U.S. consumer pays for nearly five streaming services at a time, many with consistent pricing increases, according to recent data from Kantar. In the second quarter alone, 8% of streaming subscriptions were canceled, Kantar found. “Binge watching may be great at acquiring and supporting subscription-based streaming, but it is not good for ad-supported streaming,” Dave Morgan, CEO of Simulmedia, told Ad Age. “Binge watching is not predictable, happens all at once, and then it's done. Episodic releases of shows create predictability, stretch out the audience availability and typically help the networks/publishers grow the audience over time.” Ad Age Next: Streaming Get your tickets for the Nov. 10 event in New York and use the code AA50 for $50 off Register here Now that Netflix has revealed its initial offering to advertisers, including industry-high pricing and limited targeting, a notable concern has been its anticipated audience size for the ad-supported tier. The platform anticipates 500,000 ad-supported subscribers by the end of the year, should it meet its planned November ad-tier launch date. Netflix had 220 million subscribers for the ad-free service at the end of the second quarter. “It’s not like all of a sudden all folks on ad-free Netflix are going to join advertising Netflix,” admitted Spencer Neumann, Netflix’s chief financial officer, during its most recent quarterly earnings call in July. Morgan said that to hoist the value of its ad inventory, Netflix may be forced to recondition audiences to slower rollouts of series, which it has occasionally tested, albeit typically preferring bulk releases, holding over subscribers across pay periods. “For ad-supported media, it is all about having a large, predictable and valuable audience to sell and deliver to advertisers when they need and want it, and will pay for it,” he said. Some platforms consistently favor weekly releases, such as Hulu, which received 18% of Netflix subscription cancellers in 2021, the largest share of major platforms, according to a survey from streaming insights firm Antenna. Tanya Zvonkin, senior VP of national video investment at Canvas Worldwide, cited Hulu as an example of a streaming platform that regiments its audience “so [advertisers] can somewhat be able to plan accordingly—that you have the flow of audiences so you can have them when you need them, not necessarily for a weekend when a show comes out.” “Netflix releases an entire season, people binge over the weekend, then kind of goes dead on the other weeks,” said Zvonkin. “So it makes sense to slow down the release because at the end of the day, people who like to binge can wait until the season is over and then they can binge and everyone wins, right?” See all of Ad Age's 2023 Agency A-List winners here Kelly Metz, managing director of advanced TV at Omnicom Media Group, expressed benefits to both sides of binging, calling it “both a blessing and a curse.” “It is a blessing that binge viewership is similar to event viewership where you can reach a lot of households in aggregate all at once when content is fresh and binge watching occurs,” said Metz. In that way, Netflix has experimented with staggering its premieres such as with “Stranger Things 4,” which launched two clusters of episodes at the end of May and the beginning of July. In its first four weeks, “Stranger Things” generated 1.3 billion hours of viewership for the streamer, which notably lost 1 million subscribers in the same quarter of the first cluster of the show’s release. “The curse [of the binge model] is that you have a very limited window to reach that consumer while managing frequency, which may not create an optimal ad experience,” said Metz. “Generally, we prefer consistent viewership.” Metz concluded that while the binge model isn’t a definitive do-or-die for streaming advertising, it does necessitate diligence in the ever-changing practice of marketing from both the buy and sell sides. Ultimately, binge-viewing is “another viewership behavior to be managed and optimized as we deliver campaigns,” she said. “It’s really vital that we are receiving the right signals from our inventory partners to do that. Everyone needs to be invested in bringing a better ad experience to streaming ads.”

Why Netflix’s binge-watching model could impact its advertising prospects

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