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Netflix may consider ad-based content offering, former ad leader says

At some point when Netflix Inc. subscriber gains begin to slow, the streaming giant could make the jump into the advertising arena, according to Irwin Gotlieb, the former longtime leader of WPP PLC's media-buying unit, GroupM.

Speaking at the Advanced Advertising Summit in New York March 25, Gotlieb, now a senior adviser to WPP, said that while Netflix has not expressed any interest in presenting an advertising-backed package, the streamer would not be doing its "due diligence" if it was not evaluating a lower-priced offering containing commercial content.

He said Netflix has been able to continue its subscriber trajectory by expanding to new international markets. Eventually, though, Netflix will tap all geographic regions and as customer growth slows, it will "need to do something."

Gotlieb is not exactly sure what format might materialize but suggested "a hybrid ad model could be one of the paths they take."

Stateside, Gotlieb said Netflix got the jump and hold on the streaming market as an early, low-priced entrant. But given limited, if any real growth in household income for many Americans, he said many families will only be able to afford one or two subscription streaming services, not three or more. Such entertainment cost considerations, amidst a host of other monthly obligations, is why there has been a push toward more advertising video-on-demand services.

Asked if advertising technology and viewing data is shaping upfront negotiations, Gotlieb said they already have and greater modification lies on the horizon.

Not long ago, he said there were expectations the market would advance in the mid-single digits, or go higher or lower depending on demand. In recent years, some growth has been fueled by "measurement-based audience stimulation, only part of which is real."

He foresees a time when the legacy ad buying negotiating practice will end, with machines making selections at the impressions level. The "tipping point" will come when digital can efficiently and effectively match broadcast as a mass reach vehicle, he said.

Gotlieb's not sure if that is three to five or seven to 10 years out, but he's convinced it will transpire: "It's inexorable."