Netflix Looking For Advertising Tour Guide, NCTC Considers Comcast’s Flex OS — TVREV

1. Netflix Looking For Advertising Tour Guide

Now that Netflix has publicly stated that they are going to roll out an ad-supported option they have to, you know, actually go out and start selling and serving up advertising. This is not a skill set they currently possess, and so, rather than attempt to hire some people and go it alone, they are looking to partner with someone wiser and more experienced, someone who can serve as a tour guide and show them the ropes .

Rumors abound that Roku, Comcast and Google are the three leading contenders, though Roku may possibly have been eliminated from that mix.

Why It Matters

Working with an experienced partner to learn the ropes is a very smart move on Netflix’s part. It acknowledges that they know nothing about the ad business and that working with someone who does the best way to learn.

Co-CEO Ted Sarandos has stated that “the company wanted to design an ad experience that would be ‘more integrated and less interruptive’ than traditional TV advertising” and that is not going to happen overnight.

So why not pair with companies who have decades of institutional knowledge on how it all works?

Of the two finalists, it would seem that Comcast has a real edge

Or not.

Allow me to explain.

For those of us closer to the action, Google’s “creepiness” factor looms large: people in the industry worry that the company already knows too much about consumers from search and Gmail and there’s a fear that their ability to add to that knowledge base from consumers ‘ Television viewing habits will allow them to dominate TV in the same way they (along with Facebook) dominate digital advertising, which would then introduce a whole range of privacy concerns.

What’s unclear though, is how much of an issue this is in the real world, among both brands and consumers and how much of a perceived negative this would be.

On the one hand, there’s a strong anti-tech backlash. On the other, it’s unclear whether consumers view a cable company like Comcast as a valiant defender of consumer privacy rights and whether brands are really all that bothered about having to run all their digital advertising through Google, which, admittedly, does a pretty good job .

Thus, Netflix may decide that the optics of going with a digital company like Google may be preferable to working with a traditional TV company like Comcast, making them look hip and modern and all that. Throw in the fact that Google is also working with Netflix’s main competitor, Disney, without much appreciable backlash.

That would be unfortunate however, because of the two companies, Comcast, or NBCU, to be more specific, has been doing a banner job of innovating in the space.

They have notably been leading the way in terms of seeking out alternative cross-platform currencies and results issued last week from a currency pilot test they ran in conjunction with iSpot, shows that brands are massively underspending on streaming.

As per said study, while the average media buy skews 91% linear, in order to effectively maximize reach without overloading on frequency. brands should actually be spending only 60% to 70% on line.

A stat Netflix is ​​sure to want to make use of in their marketing decks.

To be clear, this is not some self-serving stat that NBCU and iSpot pulled from out of nowhere. It is very much in line with other research, including a recent study from Samsung that advocates that brands spend 40% of their budget on streaming in order to achieve effective reach/frequency targets.

So there’s that too.

What You Need To Do About It

If you’re Netflix, you need to keep to your word and strive to create a better advertising product, both for consumers and for brands.

Ideally, you will combine forces with Disney, HBO, Paramount and Peacock to try and impose some much-needed standardization on the industry, everything from measurement to audience targeting to ID resolution to privacy. Because (and we can’t stress this enough) the more standardization there is, the easier it will be for brands to commit 40% of their budgets to streaming.

That will also mean learning how the ad business works and then innovating, rather than just adopting the status quo. Many of us have high hopes for you in that regard, as you will come on the scene in a position of great power, given the number of brands who’d like to work with you.

Finally, don’t get greedy. It’s an easy thing to do with advertising, given how much brands are willing to pay you and the temptation to squeeze in just one more minute can be great—just ask the broadcast and cable networks—but remember that consumer experience is important too and that a poor one can cost you more than the revenue you’ll get from that extra minute.

2. NCTC Considers Comcast’s Flex OS

Way back in 2017, I was at the Stream TV Show (then called the Pay TV Show) with Cheddar’s Jon Steinberg when we both had the Eureka Moment of wondering why no one was offering up a turnkey streaming-based TV platform to replace the woefully unsexy linear pay TV platforms the majority of the over 700 broadband-providing National Cable Television Cooperative (NCTC) members then had on offer.

Fast-forward to 2022, and it seems that the NCTC is looking to strike a deal with Comcast to license its Xfinity Flex operating system to do just that—provide members with both a box and turnkey platform they can offer up to their subscribers in place of whatever it is they have now.

Why It Matters

Steinberg and I just did the math. Those linear platforms were expensive to maintain and relied on outdated set top boxes that were rarely well-designed or user friendly.

What’s more, negotiating carriage/retrans deals with all of the various broadcast and cable networks was incredibly time consuming and expensive, given that a small cable company had limited leverage over a big network and thus likely wound up paying top dollar for the right to carry popular channels.

The proposed deal would seem to solve all of these problems, giving small MVPDs a well-designed streaming device with a user friendly interface that allows them to offer a streaming-based pay TV service along with high speed broadband.

This is key because MVPDs now make the vast majority of their profits from broadband. Their pay TV services exist to create stickiness, as most viewers still expect to get some form of pay TV with their broadband and it becomes incrementally tougher to switch providers if you’ve put some time into customizing said pay TV service.

If NCTC members can get a turnkey solution that allows them to offer a product that is as good as, if not better than, the larger MVPDs they compete with, then that is a huge plus.

On a macro level, it proves out something we’ve been preaching for quite some time now: The Great Rebundling is coming and MVPDs are best positioned to provide these new bundles which will be heavy on streaming, with SVOD services playing the role formerly played by HBO and Showtime, and the FASTs playing the role previously played by the various cable networks.

It will, if successful, also give the bigger cable companies, Comcast included, some competition, which is why at some level it is curious that Comcast is pushing this, though my assumption is they’ve done the math and they’re not all that worried.

Real competition will happen when (and if) the telcos—Verizon, AT&T and T-Mobile—are able to roll out fixed wireless 5G modems to the home.

But that appears to still be a long, long way off.

What You Need To Do About It

If you’re an NCTC member, this should be a sweet deal for you and a great selling point for potential customers. The Comcast name alone should work wonders in getting prospects over the fear of a smaller provider, and the well designed and easy to use Flex interface will ultimately make them feel they are getting real value.

If you are Comcast (or Comcast and Charter to be exact) this is a good way to get the Flex device and interface in front of a whole new audience. I suspect you are betting on the fact that most NCTC members are too small to seriously take a bite out of your business and the profit you get from the licensing deals will offset whatever subscriber losses you suffer.

Others have tried to corner this market—TiVo’s MobiTV comes to mind— but timing is everything and it looks like you may just be in the right place at the right time

If you are an SVOD service, this is a great way to add subscribers, especially full-year subscribers to your service and to enlist a third-party to help you sell subscriptions. Who owns what in terms of data will be the sticky point here, but ideally some sort of mutually beneficial arrangement can be reached, so it would appear to be in your interest to get on board.

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