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Netflix blazed a path in the streaming era that many of its media rivals have tried to follow. As it has tried to navigate Madison Avenue, however, the company has found bumps in the road.
The streaming giant last week
rolled back its projections for advertising revenue, calling for $2.7 billion instead of $3 billion by the end of 2026. At a time when marketers have been moving their dollars from linear TV to streaming video by the millions, the disclosure was surprising. Netflix co-CEO Greg Peters cited “some delays in the rollout and partner integrations” for some of its new advertising products as a primary culprit for the pared-back estimates.
Media buyers, however, say Netflix has for months held lofty expectations that are out of sync with the general advertising market. These executives say Netflix’s pricing for inventory remains too high, the process for accessing some of its inventory is too removed from the rest of the market, and that the company’s interest in selling ad-supported sports events like Christmas Day games for NFL football has not been matched with a sales executive who is versed in the nuances of such telecasts.
“There’s an existing marketplace, and there’s an existing way of working, and a lot of these digital players think that they can just come in and sell, and it’s not that easy,” says one media buying executive with knowledge of the current market.
Netflix declined to make executives available for comment.
The streamer for years vowed never to sully its viewing experience with commercials, but media economics, and increased competition from services like Amazon’s Prime Video, HBO Max and Disney+ have not let it hold to those convictions. And just as Netflix has made a concentrated foray into ad sales, the market for streaming inventory has been undermined by a glut of supply. Amazon has loads of ads to sell, and traditional media outlets do as well.
The sheer tonnage of streaming inventory available has given advertisers the upper hand in negotiations. To be sure, streaming is soaring. The volume of ad commitments put toward streaming in the most recent “upfront” video market rose a whopping 30%, according to consultancy Media Dynamics, hiking to about $17.2 billion, compared with about $13.2 billion in the 2025 market.
But a rising swath of digital inventory, spurred by the rise of cheap FAST channels and increased inventory on mainstream streamers, has weakened the media companies’ stance. The cost of reaching 1,000 viewers, a key metric in these annual negotiations that is known as a CPM, is under clear pressure. Streaming CPMs during the upfront fell 4.9%, to $25.90 from $27.75, according to Media Dynamics. This upfront marked the third year in which media companies agreed to what is known as “rollbacks,” or reductions in the rate of change in pricing they seek for the viewers they deliver.
“Free ad-supported TV channels are attracting accelerating audiences especially among increasingly challenged lower per capita income households,” says Pivotal Research Group analyst Jeff Wlodarczak in a recent research note.
Other media companies are likely to face these pressures. Simply put, more streaming inventory is purchased via programmatic means, or via algorithms that seek out particular audience characteristics, such as expectant mothers or first-time car buyers. This digital automation of advertising inventory has made it harder for media companies to prove that such video opportunities are “premium,” or better than what else is available in the market.
Some companies have tried to create new ways to stand out. Before its acquisition by Skydance, Warner Bros. Discovery burnished its ability to help advertisers identify specific settings and emotions present in its programming library. So a marketer might look for a scene set in an airport, grocery store or theme park, or seek out shows that made viewers feel a sense of mystery, curiosity or adrenaline. Paramount had touted a concept called a “streaming fixed unit” that gives advertisers who buy it the same ad placement in the premieres of new episodes of top shows such as “Tulsa King”. When an advertiser buys the unit, it is also buying a guarantee that Paramount will run the ad in a fixed place, such as the first spot in a commercial break, for the first seven days after the episode debuts.
Netflix isn’t the first new-tech streaming purveyor to face challenges upon turning to the ad market. Amazon infamously pressed advertisers to pay more for “Thursday Night Football,” then untested as a stand-alone on the Prime Video platform, than they did for Fox’s Sunday-afternoon NFL games, some of the medium’s costliest properties. Media buyers pushed back, and Amazon is believed to have retreated from some of its highest price demands.
To be sure, Netflix has something many advertisers want: Programing that gets attention. Blue chip marketers ranging from Coca-Colato Anheuser-Busch and State Farm have turned logistical somersaults to link their products with programs like “Stranger Things,” “The Gentlemen”and “Running Point,” often with stand-out placements in and commercials liked to the series. The challenge, of course, is that the number of sponsorships available hinges on Netflix’ programming slate.
“We’re still growing, our ads business is growing over 80% this year. And I think noting that if you are sufficiently aggressive with your product road map, you’re going to occasionally be behind some milestones,” Peters said, adding: “General demand remains very strong, the breadth of advertisers continues to expand, and ultimately, advertisers want our new products and features, and that’s a big mechanism of growth for us. So we are very focused on getting those out to them as quickly as we possibly can.”
Getting more ad dollars into its funnel may require a little savvy. Buyers feel Netflix’ initial decision to focus on creating a stand-alone suite of ad-tech may have crimped some of its efforts. “They were trying to build their own walled garden, their own tech,” says the buying executive. “It is just going to slow down adoption, because you’re making it harder for us to work with you in the ways that we’re used to working.”
Perhaps Netflix has heard this complaint. The company has struck deals in recent months to allow its programmatic ad inventory to be purchased via Amazon and Yahoo platforms. Last week, the company unveiled an expansion of its interaction with Trade Desk, a demand-side platform that functions as one of the bigger programmatic marketplaces.
With sports the only programming format that trulylures the sizable and simultaneous crowds advertisers covet, Netflix may want to beef up its expertise. Too often, the buying executive notes, Netflix has been slow to reveal pricing terms or inventory packages it sought around sports properties. “There was confusion about even just basic things. Are you requiring a match spend on entertainment? When are you sending out plans? When are we negotiating pricing?” this buyer says. “They’re being too difficult to work with, and it just makes things harder.”
Boosting ad sales may come as a distraction as Netflix executives fret about their service’s ability to keep subscribers and boost the number of hours they spend with the platform. Ted Sarandos, Netflix’s co-CEO, described a scenario under which Netflix had to work harder to develop relationships with producers, directors and other members of the creative community. A new executive, Peter Rice, formerly of Fox and Disney, has come aboard to focus on just that.
The ad revenue will remain equally important, argues Dan Salmon, an analyst at New Street Research. “We expect mis-execution in the ad business to be added to the investors’ #1 concern about continued slumping engagement,” he says in a recent research note.
