Report: Netflix might cost TV advertisers up to $6B in lost revenue

Dive Brief:

Video streaming service Netflix is having a major effect on TV viewing habits, potentially costing advertisers between $3 billion and $6 billion in revenue, according to a report in nScreenMedia.
In Q3 2017, Netflix had 56.4 million streaming subscribers, who each miss about 35 commercials per day due to streaming on the ad-free subscription platform instead of turning on the tube. This adds up to nearly 2 billion missed ad impressions per day, per nScreenMedia.
The average Netflix viewer in the U.S. misses 5,753 TV ads during primetime and 7,032 in non-primetime viewing, suggesting the value of the missed ads totals $7.6 billion for all subscribers. However, taking into account ad skipping through DVRs and the use of premium networks like HBO, the estimated value of lost ads drops to about $6 billion, according to nScreenMedia.

Dive Insight:

Marketers are well aware of the growing trend toward cord-cutting, and the rise in dominance of ad-free, subscription-based streaming content, but nScreenMedia's insights pinpoint a fairly stark dollar amount in terms of the missed revenue opportunities for TV networks and brands. With the value of TV advertising totaling $72 billion in 2017, Netflix viewers alone took away 4% to 8% of that potential money-making ad opportunity, the publication found. This is having major effects on TV networks who survive off ad revenue, as well as brands that might see declining ROI on their TV ad efforts.

The number of pay TV subscribers continues to fall, as more consumers cut or trim the cord and forego cable for alternatives like Netflix and digital video on sites like YouTube. In 2017, TV ad sales fell 7.8% to $61.8 billion, marking the steepest decline in at least the past two decades outside of a recession, according to recent data from Magna Global. At the same time, sales at cable networks declined for the first time in almost 10 years. Besides cyclical live TV events like the Super Bowl, Winter Olympics and the U.S. midterm elections, it doesn't appear that ad sales will rebound much — if at all — in the future, and analysts expect the TV ad space might never recover to its previous peaks, Bloomberg reported around the Magna Global news.

The portion of subscribers to both pay TV and Netflix are equal at 73%, according to a recent survey by PwC. Among respondents, 46% reported registering for at least one new streaming service within the past six months. However, the growing number of streaming services, which include Netflix, Amazon Prime Video and Hulu, is starting to overwhelm consumers. PwC found that 75% of respondents said they couldn't handle having more than four streaming services in addition to pay TV, and most reported only watching two streaming services regularly, signaling that the market may reach a saturation point in the near future.