- Amazon is leading Netflix in the TV ad haggle with a bigger audience and lower prices.
- Advertisers are attracted to Amazon's larger sports footprint and broader ad portfolio.
- Amazon's Prime Video ads have lowered industry prices, affecting Netflix.
Amazon is pulling ahead of Netflix in the battle for TV advertising.
Both companies made a splash at this year's upfront presentations, where streamers make their pitches for the nearly $70 billion in annual TV ad spending and advertisers seek to lock down the bulk of their annual TV ad commitments.
But among newer streamers, it's Amazon that's winning advertisers' wallets, several ad buyers told Business Insider. Amazon has a bigger ad-supported audience, a larger sports footprint, and lower prices than Netflix. Amazon also has a broad portfolio including Twitch and Wondery that advertisers can use to extend their ad buys, and the ability to tie ads to sales results.
Amazon already made a big impact on the TV ad market in January when it turned on ads for all Prime Video viewers by default, giving advertisers 115 million additional US viewers to target. Netflix says it has 40 million global monthly users of its ads tier. That's not an apples-to-apples comparison with Amazon, but suffice to say Netflix's ad-supported audience is much smaller than Amazon's.
Amazon's big increase in ad inventory and lower ad prices, of about half the ad rate ($30 per 1,000 impressions) that Netflix sought when it launched its ad tier in 2022, put pressure on other TV ad sellers to lower their prices.
One ad-holding exec said that Amazon's introduction of Prime Video ads this year has lowered streaming ad prices by 20% — most notably affecting Netflix and Disney+, which buyers said were priced especially high at launch. This person, like other ad execs interviewed for this story, was given anonymity to be able to freely discuss sensitive negotiations.
A second ad-holding-company exec said they expected Amazon to be the third or fourth biggest TV ad seller in the upfronts, behind traditional TV stalwarts NBCUniversal and Disney and potentially YouTube.
The exec noted that Warner Bros. Discovery was not budging on advertisers' pushes for lower ad prices and Paramount's future as a stand-alone company was in flux; Netflix didn't rank. Upfront negotiations are ongoing, and the final outcome is still uncertain.
"You can't ignore the move Amazon is making in the marketplace," the exec said. "They single-handedly forced a huge shift."
Four ad insiders who spoke with Business Insider placed Amazon ahead of Netflix in this year's big battle for advertising.
Amazon is gunning for sports ad dollars
Sports has emerged as a big differentiator that's giving Amazon an edge. Live sports programming, despite its soaring costs, has become crucial to keeping viewers, as evidenced by the current scramble by multiple companies for NBA rights. The live nature of sports also makes it a must-buy for advertisers who need to promote time-sensitive products and events. They're also aware that viewers may prefer TV shows and movies without ads but still tolerate ads in live sports.
Amazon has aggressively pushed into live sports and is in the third year of an 11-year deal with the NFL, the most popular sports league, to broadcast "Thursday Night Football" games.
Ad buyers said Amazon's "TNF" offering has matured and that after setting prices high early on, its price is now right. A third ad-holding-company exec described it at $300,000 to $400,000 per game, in line with other sellers of NFL games. Prices can vary based on the matchup. Amazon has introduced other bells and whistles, like ads customized to the specific game, and advertisers have been pleased with the audience the games have attracted on Amazon over time.
Amazon is also broadcasting NASCAR, National Women's Soccer League games, and some Women's National Basketball Association games.
Netflix has been playing catchup to Amazon when it comes to sports. It did a $5 billion deal to broadcast WWE's flagship weekly wrestling show, "Raw," alongside other WWE programming, and a three-season deal with the NFL to broadcast some games, including two on Christmas this year.
It also has a series of other live entertainment on the calendar, including live tennis and golf events, around which to sell advertising.
Two ad buyers said they got sticker shock from Netflix's initial ask for about $800,000 for each NFL game, which included ads that would run across its ad-supported tier. The third buyer called it akin to what Fox would charge for an America's Game of the Week, a highly rated game with a built-in audience. Netflix's first games, by comparison, will fall on Christmas Day, coming after the big holiday selling push. Netflix has to count on people to find the games on its platform, and should the audience fall short, it doesn't have lots of other games to make advertisers whole.
"Those asks are completely out of whack considering they're still building their ad tier," the second exec said.
It's typical for ad sellers to aim high with a new offering and for prices to come down over time. Netflix cut its cost to reach viewers of non-sports entertainment by around 30% last year after launching its ad tier at rates as high as $65 per 1,000 impressions. Some advertisers still are pushing for it to come down another 10%. They might get their wish. According to The Wall Street Journal, Netflix is offering some advertisers rates as low as $29 per 1,000, in the neighborhood of what Amazon is seeking.
Netflix and Amazon declined to comment.
Still, advertisers are pushing for more with Amazon
Amazon has a ways to go in selling TV ads the way advertisers have become accustomed to buying them for decades, however.
One quibble ad buyers have with Amazon is that the company won't give advertisers any benefit for dollars they spend on "Thursday Night Football" ads when negotiating for Prime Video ads, in keeping with the standard practice among TV ad sellers like NBC and Disney.
Advertisers also want to see a lot more data from Amazon about who's watching its entertainment programming and the context behind it. Some buyers have questioned how much people are watching Prime Video, which is included with their Prime membership whose primary draw is the shipping benefits. Some have been left skeptical and confused about what the numbers it's shared really mean.
Data has shown that people watch three times as much Netflix as they do Prime Video, although Prime Video viewing is growing.
Still, buyers are far more enthusiastic about Amazon than Netflix and other streamers like WBD's Max. They're pushing hard to negotiate streaming ad rates that are on a par with broadcast TV and consider streaming ads too expensive, given that most TV watching is still happening on linear channels, where advertising is cheaper.
And Amazon is working on developing packages that would allow big advertisers to advertise across Prime Video, sports, and streaming inventory like Freevee and Amazon Fire, according to the first ad-holding exec.
Ed Papazian, founder of ad consultancy Media Dynamics, said he expected the average streaming ad rate to come down to $27 this year, from around $34 last year. Most TV advertisers are looking for mass reach at guaranteed prices, not granular targeting, which costs more.
"The typical CMOs want large numbers of cheap impressions," he said. "Their view also is, targeting is great, but it doesn't work."
Disclosure: Mathias Döpfner, CEO of Business Insider's parent company, Axel Springer, is a Netflix board member.
