Netflix will have no choice but to run ads, industry execs say

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Reed Hastings, chief executive officer of Netflix Inc., right, applauds during a news conference in Tokyo, Japan.

Akio Kon | Bloomberg | Getty Images

Netflix has said it doesn’t intend to ever run traditional ads. But advertising industry experts aren’t so sure that will be the case.

During a panel at IAB’s Digital Content NewFronts Monday, executives from YouTube, JPMorgan Chase, the UM agency and MediaLink were asked about Netflix staying ad-free.

“Well, that’s not what their recruiters say,” said Tara Walpert Levy, YouTube and Google’s VP of Agency and Media Solutions. “They’re going to need growth. Eventually, they’re going to need more growth.”

JP Morgan Chase CMO Kristin Lemkau said consumers would be open to ad-supported options if those options are transparent and consumers understand the value exchange.

“The consumer wants choice and they want something that creates value for them,” Lemkau said. “To the extent that you’ve got this subscription version versus the non-subscription version, consumers will take that tradeoff.”

She spoke about “the biggest thing to happen in TV last night,” referring to the airing of a latest “Game of Thrones” episode.

“It wouldn’t have worked with ads,” she said. “That piece of content, that type of storytelling couldn’t have happened with ads. The army of the dead are at the wall, and we’re still fighting among the houses.”

Other streaming services offer both ad-supported and ad-free options. Hulu, for example, sells its ad-supported service for $5.99 per month. It costs $11.99  per month without ads. CBS All Access has similar offerings.

Joshua Lowcock, global brand safety officer and U.S. chief digital and innovation officer of Interpublic Group of Cos.-owned media agency UM, said though there’s been a move toward getting rid of ads, it will go back the other way.

“We grew up in digital, believing we should inject ads everywhere at every moment we could,” he said. “And that’s why you’ve seen ad blockers and a move to ad-free environments. I think there will become a tipping point where ads come back. Netflix is ad-free now. I can’t imagine a world where Netflix will be ad-free forever. If you look at their content costs … that’s where addressable advertising and new ad formats will come in.”

Netflix did not respond to a request for comment on the panelists’ remarks.

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