[Asia Economy Reporter Jeong Hyunjin] Global online video streaming service (OTT) provider Netflix appears to be accelerating preparations to introduce an ad-supported subscription plan. To insert ads into popular content, Netflix is reportedly revising contracts with major Hollywood studios such as Warner Bros. and is also searching for an executive in charge.
On the 12th (local time), The Wall Street Journal (WSJ), citing multiple sources, reported that Netflix has begun discussions to adjust contracts with major studios including Warner Bros., Sony Pictures, and Universal. The discussions involve Warner Bros.' original drama "You," Universal's "Like a Russian Doll," and Sony's "The Crown" and "Cobra Kai." Additionally, contract renegotiations are underway for older TV dramas such as "Breaking Bad" and "NCIS."
Although Netflix produces numerous original dramas, WSJ explained that the studios that produced these shows hold the licenses for placing ads, so separate contracts are necessary. An industry insider stated that some studios are expected to demand a premium of about 15-30% on existing contracts if Netflix adds advertisements.
Jeffrey Schlesinger, former Warner Bros. chairman, said, "Companies contacted by Netflix will go through procedures to receive appropriate value." Previously, WSJ introduced that Netflix renegotiated contracts with studios regarding content to enable customers to download content, and in some cases, signed contracts adding a 10-15% premium.
In its first-quarter earnings report announced in April, Netflix revealed that its global paid subscriber count decreased by about 200,000 for the first time in 11 years and stated it was considering introducing a low-cost subscription model with ads in exchange for a lower monthly fee. However, Netflix told WSJ, "We are still in the early stages of discussing how to launch a low-cost plan with an ad option," and added, "No final decision has been made."
WSJ reported yesterday that Netflix is currently searching for executives responsible for advertising-related services and is interviewing candidates. Among the candidates mentioned are Comcast's Chief Growth Officer (CGO) Fuja Mihha and Peter Naylor, Vice President of U.S. Sales at Snap Inc., the parent company of the U.S. social networking service Snapchat.
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