NEW YORK - With the launch of cheaper, ad-supported subscriptions, Netflix and Disney+ are expected to bite into the revenue of traditional television channels as the streaming services look towards continued expansion.
After having long shunned the notion of advertising on its platform, Netflix this year accelerated work on just such an offering as inflation prompts consumers to spend less and competition in the streaming television market intensifies.
Netflix is expected to launch an ad-supported subscription tier in early November, about a month before rival Disney+ does the same, according to US media reports.
"These launches are going to create the biggest premium advertising space in more than a generation," said analytics company Samba TV senior vice-president Dallas Lawrence. "It's going to be a major moment for advertisers."
The windfall for Netflix and Disney+ could be considerable.
Market tracker Statista forecasts that spending on television ads globally will hit US$159 billion (S$228 billion) this year.
Insider Intelligence analyst Ross Benes estimates that advertising revenues from streaming could reach US$30 billion in two years in the United States alone.
Global video sharing and online television platform YouTube saw US$28.8 billion in ad revenue in 2021.
"Not long ago, everyone said subscriptions would kill ads," said Mr Kevin Krim, head of marketing analytics firm EDO. "Now, we can see that is obviously not true."
Some streaming television services such as NBCUniversal's Peacock, Paramount+ and HBO Max already feature ad-supported offerings.
But Netflix and Disney+ - with 220 million and 152 million subscribers respectively - throwing their hats in the advertising ring could catch the attention of businesses interested in reaching television audiences, analysts said.
Netflix is looking to win over at least 40 million subscribers to its ad-subsidised tier by next year's third quarter, according to an internal document cited by the Wall Street Journal.
When the time comes, Disney+ will transition its existing US$7.99 per month subscription tier to the ad-supported version, and the ad-free option will go for US$10.99, the company has said.
Being able to reach Netflix or Disney+ viewers promises to help brands reconnect with audiences that have abandoned traditional "linear" television in favour of streaming entertainment, said nScreenMedia chief analyst and founder Colin Dixon.
"This actually gives advertisers access to people who they haven't been able to reach in a while, in their most focused viewing time," Mr Dixon said. AFP
