UK broadcasters hail rare win over Netflix in battle for streaming ads

The Guardian

13 hours ago

Shows such as Netflix's TV history-making Adolescence and Disney's romp Rivals are among the latest hits to continue the subscriber juggernaut, as the US streamers continue to mount pressure on UK TV broadcasters.
However, research reveals that a new breed of viewers being banked on to drive their next era of growth are watching up to 40% less content on some services, giving traditional broadcasters hope that their own streaming services will not ultimately be outmuscled in the battle over the rapidly growing £1bn-plus streaming ad market.
It has been two and a half years since Netflix reversed its resistance to advertising, leading the charge to tap a new market as subscriber growth petered out and the cost of living crisis made consumers more open to paying less in return for seeing ads.
The strategy has helped breathe life into stalling subscription growth. Netflix added the most customers in a quarter in its history in the final three months of 2024, with 55% choosing its ad-supported package. About a third of its 300 million-strong global subscriber base are now watching with ads.
Disney+ followed suit in late 2022 and has since amassed 157 million ad-tier subscribers, including its US-only ESPN and Hulu services. And in February last year, Amazon started automatically introducing ads to the 200 million potential monthly viewers of Prime Video, requiring customers to pay if they wanted an ad-free experience.
However, research into streaming households shows that homes that watch with ads are 'lighter' viewers, in the words of one media agency executive, compared with those who pay for higher-priced, ad-free packages.
A snapshot of UK streaming in the fourth quarter of 2024 showed that Netflix households with advertising-supported subscriptions watched an average of 22 minutes less content a day than those with an ad-free subscription, a difference of almost 22%.
Netflix is estimated to have about 17.6 million subscribers in total in the UK, of whom just over 4 million are on an ad-supported package, according to Ampere Analysis.
At Amazon's Prime Video, which is estimated to have about 12 million UK users, the same trend has emerged. Viewers who accepted ads watched an average of 23 minutes less content a day than those who had opted to pay for an ad-free experience – a difference of 44%.
While viewing minutes were not available for Disney+ UK subscribers, the research showed it had the narrowest gap, with those on ad-supported accounts watching just five fewer minutes of content a day on average than those paying for an ad-free subscription.
Matt Ross, the chief analytics officer at the streaming research firm Digital i, says two distinct types of viewer have emerged, but adds that lower levels of viewing in ad-supported households is partly because those subscriptions also typically offer access on fewer devices.
'We've seen that more engaged viewers typically opt for ad-free tiers, valuing the uninterrupted experience they provide,' Ross says. 'More premium plans offer multiple simultaneous streams, which appeals especially to larger households and families. This combination of premium features and flexibility often results in higher daily activity for ad-free plans.'
Nevertheless, the phenomenon of 'light viewers' will be grasped by UK broadcasters trying to stop the deep-pocketed US giants conquering the streaming advertising market in the same way as they have the world of paid subscriptions.
'The appeal of the global streamers' ad tiers to advertisers doesn't stack up against the streaming services offered by British broadcasters,' says one senior TV industry executive.
Certainly in the UK, at least, the drive into advertising by the big US streamers has had a mixed reception from the media agencies that buy commercial space for brands.
Netflix started with a gung-ho attitude, buoyed up by the success it had had building a huge paid subscriber base and the belief advertisers would leap at the chance to be able to place commercials in its mega-hits for the first time.
However, it demanded almost 50% more than ITV or Channel 4's services charge for advertising, alongside a hefty commitment to a minimum spend, despite initially only having a small audience and extremely limited ability to target ads.
'The rollout was a disaster,' says the chief executive of one media agency. 'Take-up was underwhelming, to say the least. They had to try again six months later and lost their lead over rivals and are now behind the curve in terms of pricing, data and reach versus, say, Amazon.'
Amazon charges about the same as the public service broadcasters' streaming services, while Disney+ charges more, despite having the smallest base of the big three US streamers, a situation the media executive describes as a 'mad outlier, given their volume'.
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Last month Netflix rung the changes, announcing that Warren Dias, the head of UK's ad sales, was to leave after two years in the post.
The world's biggest and most profitable streaming service has acknowledged it is still a newbie when it comes to the ad market. 'I think you can say that 2025 is the year that we transition from crawl to walk,' Greg Peters, the co-chief executive of Netflix, said in a recent call with analysts.
Peters said overall viewing hours per subscriber on its ads plans internationally was similar to those on its standard non-ad plans, and that it expected to double advertising income this year as it focuses on improving ad targeting for brands.
The company launched its in-house ad-tech platform in the US in April and intends to start rolling it out to other markets in the coming months.
While UK broadcasters feel the tentative start by the US giants has given them the upper hand in the British streaming advertising, which is putting further pressure on the shrinking £3.58bn traditional TV ad market, there is a sense of foreboding that history may ultimately repeat itself.
'We were successful and revolutionised TV viewing,' says Damien Bernet, the vice-president of ad sales for the EMEA region at Netflix. 'We believe we are going to be able to do the same for ads.'
More people visit and watch Netflix than any other streaming service in the UK, and in March it made TV history with Adolescence becoming the first programme on a streaming platform to top the weekly audience charts of all shows aired in Britain.
In February, 65% of 18- to 64-year-old internet users accessed Netflix, compared with 59% for the BBC's iPlayer, 48% for Prime Video, 46% for ITVX and 34% for Channel 4's streaming service, according to survey data from Ampere Analysis.
The US streamers' ad tier strategies have reignited overall growth, are rapidly increasing the scale and attractiveness of the offering for advertisers, and the cheaper pricing has made users more 'sticky' and less likely to think about cancelling.
'Fundamentally, advertising is a scale game, and in that regard many of the streamers are only just getting started,' says Richard Broughton, a director at Ampere. 'UK and European broadcasters will be far from complacent, given the competition they have faced for viewers over the past decade, but they have only a narrow window to batten down the hatches before they start to feel more pressure across their advertiser base too.'