By Andrew A. Rosen
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The Medium delivers in-depth analyses of the media marketplace’s transformation as creators, tech companies and 10 million emerging advertisers revolutionize the business models for “premium content”.
There was no mention of "competition" in Netflix’s Q3 2024 letter to shareholders last week. Typically, Netflix uses the quarterly opportunity to message both its competitive advantages and also how it sees the competitive landscape evolving.
Netflix did hint that competition in the advertising marketplace was very much on their minds. The letter touted success at the 2024 upfronts this past summer. It highlighted “deals with all major holding companies as well as independent agencies, with a 150% plus increase in upfront ad sales commitments over 2023."
Netflix assured investors in its letter that the results of its upfronts were “in-line with our expectations” and that the company is “on track to reach what we believe to be critical ad subscriber scale for advertisers in all of our ads countries in 2025”. It also offered a growth story: Its Basic with Ads tier drove over 50% of sign-ups in countries with the offering and sign-ups to the tier grew 35% from Q2.
However, as I wrote in July, Netflix’s upfront did not meet its objectives because Amazon had played the spoiler. Amazon surprised the market in June with the announcement that its entire Prime Video subscriber base would default to a new ad-supported version.
In an instant, Amazon became a new competitor, at scale, to Netflix’s advertising ambitions at the 2024 upfronts. Netflix reportedly was forced to drop its ad rates to 25% less than its prices from the previous summer.
Management avoided discussing that competition in its letter and the reason is obvious: Amazon, YouTube and other Silicon Valley competitors are in far better positions to disrupt Netflix’s business than legacy media companies ever were.
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Netflix’s venture into advertising also seems to be opening the door to competitive challenges they have long avoided with their focus on disrupting the linear business.
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Total time reading: 5 minutes
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