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Sunday, July 26, 2020 6:08:48 PM
By: Motley Fool | July 26, 2020
• Streaming services tripled their TV ad spend through the first half of the year.
As live sports and primetime programming went off the air this spring amid the COVID-19 pandemic, streaming services like Amazon (NASDAQ:AMZN) Prime Video and Disney's (NYSE:DIS) Hulu and Disney+ saw an opportunity to offer TV viewers an alternative. TV ad spending among streaming services tripled in the first half of 2020 compared to last year, according to data from iSpot.tv.
And while the top of the list included a couple of expected names in Amazon and Disney, Netflix (NASDAQ:NFLX) is conspicuously absent from the top 10 most-advertised streaming services on TV. In fact, while Netflix's competitors were increasing their marketing spend, the streaming leader actually decreased its overall spend through the first six months of the year. Despite its lack of ad spending and increased competition, Netflix managed to grow its U.S. and Canadian subscribers by 5.25 million through the first half of the year, nearing 73 million across the region.
Amazon and Disney are spending hundreds of millions
Amazon spent $170 million through the first half of the year on U.S. TV advertisements for Prime original series, according to iSpot.tv. Disney spent even more, over $300 million, across its family of streaming services. Disney picked up the pace after various states started issuing stay-at-home orders. From March 12 through June 30, Disney spent nearly $200 million. For reference, Netflix's entire global marketing budget for the first six months of the year was $938 million.
Amazon's and Disney's efforts have seemingly paid off. During the company's first-quarter earnings call, Amazon CFO Brian Olsavsky said Prime members were using their digital benefits like Prime Video more frequently. Streaming hours on Amazon climbed faster than the competition in April, leading to market share gains.
Disney has continued to grow its Disney+ subscriber base, which topped 50 million global subscribers in April. And Disney's CEO Bob Chapek was reportedly very pleased with the results from the July 3 debut of Hamilton on the flagship streaming service.
As a host of competitors entered the market over the last few months, Disney and Amazon remain well ahead of the competition. Their marketing spend may be a key part of that.
Why Netflix isn't spending as much on marketing
Netflix has been moving away from more traditional advertising channels in recent years. "It's just a more efficient, more impactful and more global way to talk to our members," CEO Ted Sarandos said during Netflix's second-quarter earnings call. "It turns out the best place to talk to [members] about Netflix is on Netflix."
Indeed, Netflix has access to one of the best digital billboards money can't buy -- the Netflix homescreen. With the amount of time subscribers are already spending there, Netflix can use targeted previews effectively to keep subscribers engaged. At this point, with nearly 200 million global subscribers, keeping households from canceling can have quite an effect on Netflix's net additions.
Netflix has also spent a lot of money on award campaigns over the last few years. CFO Spence Neumann noted that Netflix pulled back on that kind of marketing spend this year as a result of the greater uncertainty in today's environment. He says a lot of the pullback is temporary, but not all of it.
Netflix doesn't expect the marketing efficiency it's seen in the last two quarters to continue. It saw a significant boost in signups as an effect of COVID-19, and it's actually planning to spend more on marketing in the second half of the year despite a low outlook for net additions.
But with millions of new subscribers already on board, advertising new series and films within Netflix remains a better bet than spending money on television ads like other media companies. As a result, Netflix will have more cash to make its service better and stay ahead of its competition.
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