Netflix Inc.’s kids programming and new movies will stay commercial free when the company introduces its advertising-supported service, according to people familiar with the plans.
Netflix has told partners it won’t run ads during original kids programs, said the people, who asked not to be identified because the company is still working out the details. In addition, some studios that have licensed Netflix the rights to kids programs won’t allow the company to run commercials in them.
The company has decided original movies should stay ad-free, at least at first, the people said, which should allay the concerns of top filmmakers.
Netflix is still finalizing plans for its advertising-supported service, which means details and strategies could still change. The company aims to introduce the ad tier early next year, Bloomberg reported.
Netflix declined to comment on its plans beyond saying that it is still in the early stages of figuring out the advertising business.
While Netflix can insert commercials into programs that it owns, it doesn’t have the rights to do so for its entire catalogue because it licenses thousands of titles from outside studios. Many of those deals don’t include the rights to offer programs in an ad-supported environment, forcing Netflix to go back and pay extra.
The company is now negotiating for the rights with companies such as Sony Group Corp., Paramount Global and Warner Bros. Discovery Inc. Netflix will pay between 10 percent and 15 percent of the current value of the deals to secure the rights, said two of the people.
Children’s programming presents a particular challenge when it comes to advertising. Google and YouTube had to pay $170 million for violating kids privacy laws. Netflix will show kids programs in its news service without the commercials and could, at some point down the line, decide to introduce ads.
Microsoft Corp. will handle the technology and sales for advertising in Netflix, at least initially. If it grows into a large enough business, Netflix will likely build its own ads-sales operation. The company is already looking to hire salespeople and an executive to lead its advertising-supported service.
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