How Amazon Prime Video's Ad-Supported Version Reportedly Disrupted Netflix, YouTube, And TV Networks, Forcing OTTs To Slash Prices

In a significant shift in the streaming ad market, Amazon.com Inc. AMZN has caused a major disruption for Netflix Inc. NFLX by introducing an ad-supported version of its Prime Video service.

What Happened: Amazon’s move to convert its entire Prime Video subscriber base to an ad-supported version has led to a significant decrease in ad prices for everyone, including Netflix, Alphabet Inc‘s GOOG GOOGL YouTube, and TV networks, reported The Wall Street Journal. This has impacted the negotiations these platforms are having with advertisers for the upcoming TV season.

Netflix has responded by reducing its ad rates and introducing new offerings, such as product placement, to attract advertisers. The streaming giant is reportedly asking some brands to pay between $29 and $35 for reaching 1,000 viewers, a significant decrease from the $39 to $45 it charged last summer.

Amazon’s ad-supported Prime Video tier has an average reach of 115 million monthly viewers in the U.S., while Netflix’s ad tier reaches 40 million global monthly active users.

Earlier this year, Amazon Prime Video made its entry into the connected TV market. Media analyst Michael Nathanson reported to investors on Wednesday that nearly six months later, the impact of this disruption is beginning to emerge.

During its upfront negotiations, Netflix is offering larger premium-priced ad packages that enable advertisers to integrate their products and services into select programs, according to some advertisers. These programs include an upcoming drama series about bull riding featuring Tim McGraw, one advertiser mentioned, according to the report.

"Amazon in many ways is building the killer app," said John Terrana, chief media officer at the ad firm VaynerMedia. It has premium content, live sports, and immense scale, allowing advertisers to target ads to their customers and often track if a viewer purchased the product on the platform.

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Why It Matters: Netflix’s bid for upfront ad dollars is poorly timed, according to the report. Several ad-holding companies, which manage billions in ad spending across various media platforms annually for their clients, are currently vying for Amazon’s lucrative ad-buying account.

To gain favor during the pitch, many agencies might commit to purchasing a significant amount of ad time from Amazon on behalf of their clients, according to ad buyers.

Netflix’s recent announcement of a new hot dog-eating contest, “Chestnut vs. Kobayashi: Unfinished Beef,” highlights its strategy to attract viewers through unique live events. This contest will feature Joey Chestnut and Takeru Kobayashi and is set to air on Sept. 2. The event comes after Chestnut’s exclusion from Nathan’s Famous Fourth of July hot dog-eating contest due to a deal with a rival brand.

This live event is part of Netflix’s broader strategy to diversify its content offerings and attract more viewers to its ad-supported tier. By integrating unique events and product placements, Netflix aims to compete more effectively with Amazon’s extensive ad inventory and pricing strategies.

Price Action: Netflix Inc.’s stock closed at $653.26, up 0.49% on Thursday; in Friday’s premarket trading session, it dipped 0.76%. Amazon’s stock closed at $183.83 on Thursday, while it fell 0.48% in premarket trading on Friday, according to data from Benzinga Pro

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Photo courtesy: Thibault Penin on Unsplash

This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote