Why Netflix’s New Ad-Supported Tier Could Lead to More Ratings Transparency

·5-min read

Netflix stands alone in the crowded streaming industry as the most transparent company when it comes to viewership metrics, yet its public weekly data dump proves that it’s still hoarding the most valuable insights into audience consumption. Will that change with the company’s looming introduction of an ad-supported tier?

“Presumably, Netflix’s move into AVOD [advertising-based video on demand] will help, because, to quote ‘Spider-Man,’ with great advertising comes great responsibility. Specifically, to advertisers,” Entertainment Strategy Guy, a former digital entertainment executive at one of the major streaming services who now covers the industry as an anonymous analyst, told TheWrap.

Every week, the market-leading streamer unveils its 10 most-watched titles in global hours viewed across four categories: Films (English), TV (English), Films (Non-English) and TV (Non-English). This is far more intel than any other major streamer currently provides (and there’s a plethora of third-party data to draw from), but focusing on only the biggest hits provides an incomplete picture on how well most content on the platform is performing, something that has drawn criticism from top talent, producers and showrunners (as well as their agents and managers).

Introducing ads may be the first small step toward normalizing greater ratings transparency.

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Netflix’s measurements may not change publicly

Netflix judges the success or failure of a title across numerous criteria, according to internal data obtained by Bloomberg. (Not that we, the prying public, are ever privy to that information beyond the overly simplified top 10 lists the streamer releases each week).

The company weighs a number of factors:
• adjusted viewer share, which measures how a title resonates with certain viewer demographics (infrequent viewers are considered more valuable)
• an efficiency score, which measures a show’s value compared to its cost
• impact value, which is judged by how many people begin a title (starters), how many watch the majority of a title (stickiness) and how many finish it (completion).

Despite this wealth of internal measurement, Netflix’s AVOD tier — which is expected to launch in early 2023 — may not immediately result in a significant download of new viewership information. Existing AVOD tiers for NBCUniversal’s Peacock, Paramount+, Hulu and HBO Max haven’t led to greater public streaming viewership disclosures outside of official Nielsen numbers (which Paramount+ and Peacock don’t even release).

“All these companies try to hold their cards close to their chest,” Andrew Rosen, former Viacom digital media executive and founder of streaming newsletter PARQOR, told TheWrap. “I don’t know that what [Netflix] goes to market with is going to offer a lot of public transparency.”

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Netflix will need to be more transparent behind closed doors

Privately, though, Netflix will be forced to peel back the curtain for its new business partners: advertisers. Just as Nielsen ratings were developed to measure television, radio and newspaper audiences to serve ad sales, Netflix will need to provide clarity into who is watching what in order to secure much-needed ad revenue.

The streamer is projected to earn $1.7 billion from advertising in the U.S. market and $5.5 billion globally by 2027, according to a study from Ampere Analysis provided to TheWrap. That means it will have to deliver some degree of accountability, likely in the form of impressions (or the volume and frequency of when an ad is viewed) around the top 10 titles, monthly active users (MAUs) and more openness regarding starters, stickiness and completions.

“It’s one thing for media and customers to wonder how content is performing. When advertisers pay big bucks to run ads, they want to know that it’s actually being seen,” Entertainment Strategy Guy said. “And they care about who is seeing it and what it’s being advertised on. Do advertisers want to support ‘How to Build a Sex Room?’ Maybe not!”

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Creatives on the inside of this nebulous process have also grown more vocal about this issue. “The Sandman” creator Neil Gaiman has been open about what’s needed from a viewership perspective to score a Season 2 renewal at Netflix. “First Kill” showrunner Felicia D. Henderson recently said Netflix canceled the show because the “completion rate wasn’t high enough.”

But too often, producers and other creatives have complained that they’ve been in the dark on exactly how their shows have performed. “When you don’t have numbers, it’s really hard to fight back and ask for more money between seasons,” Kathleen Bedoya, creator of Hulu’s “East Los High,” said in 2020.

The hope is that as the industry continues to mature, the responsibility to advertisers and the growing pressure from the creative community will lead to more transparency as the norm rather than the exception, similar to the development of (mostly) reliable linear TV ratings and box office reports.

“Eventually, I think we’ll see legislation introduced in regions to make all streamers publish numbers of some sort and Netflix may even be pushed further in this department because of their move into advertising,” Kasey Moore, founder and editor-in-chief of What’s on Netflix, said.

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