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$2 Billion for Netflix Marketing Will Be Hard for Broadcast to Counter

September 11th, 2018   ||    by Todd Wasserman

Netflix marketing will hit new heights next year as the company has budgeted $2 billion for campaigns.

According to Adweek, that figure comes on top of the possible $8 billion Netflix has already pledged to spend on content. Netflix Chief Content Officer Ted Sarandos told investors in May that 85 percent of that spend will go toward original content, reported Variety.

The spend is a gamble on Netflix’s part, as it depends on hooking enough viewers on its original content. But such content offers more favorable economics to Netflix since it means it doesn’t have to pay huge licensing fees for content created elsewhere. Establishing its own content also makes it less reliant on rival studios which would otherwise have a greater say in determining Netflix’s fate.

For local TV stations, this is a serious challenge since Netflix has the power to convince more viewers to cut the cord. However, as standalone over-the-top content options grow, Netflix is also one of many. If viewers don’t like the original content, the move could backfire.

Justifying a Huge Marketing Budget

At $2 billion, the Netflix marketing budget places it among the world’s top advertisers. For comparison’s sake, AdAge reported that Comcast is estimated to have spent $5.7 billion on advertising in 2017, making it a top spender.

Considering Comcast’s spend, Netflix’s outlay appears rational. Netflix also has to compete with tune-in ads that networks run themselves on their stations and affiliates. Reruns and old movies on cable also have built-in audiences that don’t need as much promotion as new content.

Netflix promotes its content on its own channel but that’s not an effective means to reach new viewers. However, the company sees content as an investment with future dividends. The company hopes that its use of data to inform the creation of shows will result in content that effectively sells itself. The company cited The End Of The F—king World as a show that did well with little promotion.

Can Local TV Deliver a Counterpunch?

There’s no doubt that Netflix is a tough competitor for local TV. In the face of high cable bills, many consumers justify their decision to cut the cord by pointing to Netflix’s $10.99 monthly fee. As Netflix’s original content, like Stranger Things and Orange Is the New Black, become mainstream pop culture phenomenons, it becomes even harder to turn down the streaming platform. Luckily, a Nielsen study revealed that 93 percent of adults who stream video also watched traditional TV.

Audiences are also developing a lower tolerance for TV commercials that networks need to counter. According to a 2017 Nielsen study cited by CNN Media, there were about 13 minutes of ads per hour on broadcast TV, and 16 minutes on cable. Fox and NBC Universal have pledged to run fewer ads, according to AdAge. Fox is also experimenting with branded content pods that they hope viewers will find less interruptive. But is tinkering with commercial time lengths going to be enough against Netflix, Amazon and the ad-free version of Hulu?

Linear TV’s increased advertising spend will certainly help — media agency Magna predicts a 0.2 percent increase, leading to a $43.5 billion spend this year. This increase, along with local TV’s assets like brand safety for advertisers and the draw of live TV to name a few, will give broadcasters a fighting chance, as long as they strike hard.

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