GroupM has raised concerns that the growing popularity of SVOD services will deny advertisers the chance to reach consumers, because they are locked behind subscription walls where there is no video advertising inventory. The media buyer is keen that commercial TV should hang on to its audiences but is also hoping that Netflix and companies like them will evolve to include advertising.
Speaking at Future TV Advertising Forum Canada in the spring, Irwin Gotlieb, Global Chairman for GroupM, said: “Our challenge [as a TV advertising industry] is to ensure that as much of the audience as possible goes to advertising supported distribution paths and not to subscription-supported distribution paths.” But he then made it clear that his company would welcome ads on major SVOD services.
“Our role is to mitigate inflation of media pricing on behalf of our clients and the best way to do that, in a marketplace where price is a function of supply and demand, is to ensure that supply [of desirable advertising opportunities] grows and never declines.”
He noted that Netflix is focused on growing its subscription user base today, that its valuation is based on future growth and that eventually subscription VOD growth will plateau. “When you find fewer and fewer people willing to pay ten bucks [$10] a month for your service you start to explore other avenues.”
Referring to popular SVOD services more generally, Gotlieb added: “I am virtually certain we will see hybrid models and SVOD services that are minimal cost and advertiser supported.”
GroupM has been calling for Pay TV operators and ad-supported channel owners in Europe and Canada to accelerate the deployment of advanced advertising on broadcast infrastructure, and especially household-level addressable TV. The company has made it clear that it will start to favour TV inventory owners who provide the innovation it seeks.
“It is the right thing for us to do for our clients,” Gotlieb told the Toronto conference. “It will improve their ability to target their prospects and it will improve the spend level that they apply to media. If we have to favour the people who do those things that favour our clients’ interests, it is that simple.”
Gotlieb hailed the fact that GroupM’s (traditional) media owner partners are terrific at creating compelling content that continues to attract large audiences. But he said of the Canadian market in particular: “I hear a lot of reasons why things cannot be done, the fact that it is complex and there are business rules, and it is all bullshit.
“You have to get over it [the hurdles] and get on with it [addressable advertising] because if this is not done by the broadcast community it will be done to them.”
Would Netflix advertising provide a useful stick, in the form of increased competition, to accompany the carrot, in the form of increased ad spend for TV, to help get advanced broadcast advertising moving?
“From where we sit, we would love to see it [advanced advertising] happen with the partners that we have worked with for the last few decades,” the GroupM Chairman emphasised, referring to traditional TV. Nevertheless, the indications that GroupM would welcome advertising on major SVOD providers like Netflix should be taken as a warning: the company will follow the eyeballs and the innovation.
Last year we reported how senior brand buyers like Unilever and Santander would be happy to advertise against content on Netflix, and we have spoken privately to other agencies in Europe and Canada who echoed those sentiments. Internal research by the agency OMD, revealed at Future TV Advertising Forum last year, showed that 68% of consumers would consider using an ad-funded model for Netflix.
Photo: Irwin Gotlieb
What happens if SVOD providers offer advertising?
Interested in the likely impact across the industry if major SVOD providers like Netflix introduce advertising tiers? We will be exploring this scenario at Future TV Advertising Forum in London this December. More about that event here.