Netflix is the streaming TV ‘vanguard’ for marketing tie-ins with brands, but some partners call the company’s approach elitist (NFLX)

Brian Ach/AP Images for Coca-Cola

Netflix is paving the way for more marketing tie-ins to streaming shows, marketing and agency execs who have worked with Netflix and its productions told Business Insider.
But the streaming giant is still figuring out how to weave brands in and around its shows, and how close it’s willing to let advertisers to its platform.
Netflix has been selective about the partnerships it strikes, handpicking the brands it works with and developing the creative ideas in-house.
That has rubbed has some brands and agencies the wrong way. "It can give a sense of elitism," one marketing exec who has worked with Netflix said.
Nonetheless, brands say that Netflix is more nimble and willing to experiment than other premium networks like HBO, and has more opportunities, because of its vast production output, than other platforms like Amazon Prime Video.
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If you’re a brand looking to land a high-profile tie-in to a Netflix original like "Stranger Things," Netflix will call you — you won’t call them.

The streaming-video service is opening the door for more marketing tie-ins and licensing deals around streaming TV, approaching brands with more opportunities than competitors like HBO or Amazon Prime Video, Business Insider found based on interviews with eight marketing and agency execs who have worked with the streaming giant.

But the tech company, which doesn’t sell ads, is still figuring out how to weave brands into and around its shows, and how much it’s willing to let advertisers onto its platform. It is also just starting to build relationships with brands. And, for the most part, those relationships are on Netflix’s terms.

The execs who have worked with Netflix don’t expect to see as high a volume of promotional tie-ins as the company had around the third season of "Stranger Things" when Netflix releases its next slate of original series like "The Witcher," Ryan Murphy’s "The Politician," and new seasons of international hits like "The Crown" and "Elite," during the busy fall TV season.

"Netflix is really paving the way for the platforms and they’re very vanguard for what they’re doing," Caressa Douglas, SVP of global strategic partnerships at Branded Entertainment Network, an agency that specializes in product placement and licensing deals, said. "But they’re very judicious with how much they do and partner with. They don’t want to dilute the brand and be too commercial."

Netflix did not respond to a request for comment for this story.

Brands like working with Netflix shows.

As viewers spend more time with ad-free platforms like Netflix and HBO, brands are exploring other ways to get on screen through product placements, or broader marketing tie-ins to TV shows.

Major streaming platforms including Netflix, HBO, Amazon Prime Video, and Hulu, have been experimenting with brand partnerships to build more buzz around flagship series, similar to the way movie studios work with blue-chip advertisers to promote their biggest releases.

The execs Business Insider spoke with said Netflix had more opportunities for brand partnerships than its streaming competitors, partly because it puts out more shows than the other services.

They also said Netflix was the most willing to experiment with those partnerships. It worked with brands like Funko and Lego to make custom toys tied to "Stranger Things." It partnered with Lyft on in-app experiences tied to new seasons of "Glow" and "Stranger Things." It’s done experiential events with brand partners, like Baskin-Robbins, and created a custom sneaker collection with Nike.

Those deals worked because Netflix didn’t let itself get too bogged down in process. There’s no template for what a brand partnership with Netflix looks like. Netflix staffers, who have been developing these kinds of relationships around shows for about two years now, approach each deal differently.

"The core focus is, create all these merchandising opportunities, tie-ins, touch points, so that you feel the ‘Stranger Things’ energy so that more people join," Reed Hastings, Netflix’s CEO, said during a July earnings call, in which he added that Netflix isn’t trying to build a new revenue stream from these deals.

Netflix is breaking the mold for how brand deals with entertainment properties are done.

Where movie studios have quotas for the amount of media spend they bring in from outside partners around major theatrical releases, Netflix typically doesn’t ask its partners to commit to a certain media spend, marketers who have worked with Netflix said. The deals are meant to bring in new, like-minded audiences to Netflix shows, rather than be a mad grab for media dollars.

"It’s a different philosophical approach," one marketing exec who has worked with Netflix said.

It also creates more opportunities for smaller or mid-sized brands that don’t have big marketing budgets to work with Netflix.

Douglas at BEN said she’s seeing more interest from brands around Netflix productions, as well as HBO shows, partly for this reason.

"The huge tentpole promotions you see with films, they only partner with a couple of brands and it’s really expensive." Douglas said. "I personally am seeing an increase in interest."

One of Netflix’s licensing partners on "Stranger Things" said it didn’t have to guarantee the company minimum royalty payments, either, which it usually does when it licenses entertainment properties for consumer products. It simply sold as much as it could, and gave Netflix a cut of the revenue, as is standard in licensing deals.

Netflix calls brands; brands don’t call Netflix.

While Netflix’s nimble approach has its advantages, its method for approaching brands can rub some marketers the wrong way.

There are a few different ways Netflix and its productions work with brands. Marketing tie-ins and licensing deals are typically handled by Netflix’s brand partnership and consumer products teams. Product placement is usually managed by the production itself — by prop masters, costume designers, and other crew — and signed off on by Netflix. In some cases, like if Netflix acquires a show, the product placement could be done without Netflix.

Netflix chooses the brand partners it wants to work with on show campaigns and take its ideas to the brands directly. The company doesn’t request proposals or field creative pitches, as happens elsewhere in the ad industry.

Netflix has proven itself willing to experiment with brands on the creative. But it won’t compromise on its brand partners. If the brand Netflix approaches isn’t interested, it won’t try a second- or third-tier brand in the same category. It’ll move on.

The strategy can come across as elitist to veteran advertisers who aren’t used to working that way.

"It’s like they’re internally coming up with their ideas and they’re resistant to anything else," said one agency exec, who said Netflix pulled the plug on a proposed promotional deal with a client. "They really are not brand friendly."

Netflix doesn’t have the infrastructure to support a lot of brand deals.

That could be because Netflix doesn’t have the infrastructure of major movie studios, which have large teams dedicated to big-budget marketing tie-ins with automakers, soda brands, and other advertisers; or the support of the ad-sales operations that TV networks have.

Netflix has a small team of 10 or so staffers in Los Angeles, California who are forging these deals under the leadership of former Disney exec, Christie Fleischer, who oversees consumer products, brand partnerships, and partner marketing; and Barry Smyth, director of global brand partnerships and partner marketing. They’re also supported by specialists in key international areas.

The teams are focused on landing a handful of key deals that will draw attention to Netflix’s tentpole series and movies.

Netflix’s brand partnership endeavor is also said to be very creator-driven, as was the case with "Stranger Things" creators, Matt and Ross Duffer, who wanted to work with brands from the 1980s to give the show an authentic feel.

"You should think about all those product partnerships as a character in the film," Ted Sarandos, Netflix’s chief content officer, said in July. "Remember the show is set in 1985 and it’s set in the heart of when the big summer blockbuster movies were jammed with product placement, and there was really a creative choice when they talked about pitching that season out."

Not all of Netflix’s deals are create equal.

Not all of the deals Netflix struck around "Stranger Things" received the same attention from the streaming company, however. Netflix helped promote its partnerships with big advertisers like Coca-Cola in media interviews and on social media. In other cases, it limited the ways its partners were permitted to promote the deals.

One exec at a consumer-products company that had a licensing deal with Netflix said the company was allowed to promote the partnership on social platforms, but not put out a press release announcing the relationship. Netflix also didn’t plug the deal itself.

"The major brands got some good love from Netflix," the exec said. "I can understand why. But it was a little bit frustrating that they didn’t want us to spread the word."

That can hamstring some partners, as one of the ways brands measure the success of marketing tie-ins, which aren’t easily linked directly to sales or other metrics, is through the earned media or brand awareness the effort generated.

‘Stranger Things’ season three was a big experiment for Netflix, which may have gone a little too far.

The limitations imposed on that licensing partner may have been a byproduct of the volume of partnerships tied to the third season of "Stranger Things."

The show was a unique opportunity for Netflix to experiment with brand partnerships — and see whether its audience wanted to engage with the show outside of the Netflix platform — because it had grown into an event series, and creators, the Duffer Brothers, wove iconic 1980s brands into the story to make the show feel authentic to the time period.

The company struck deals with more than 70 companies like Coca-Cola and toymaker Lego to promote the third season, and featured more name-brands from the 1980s, like Chevy and JVC, in the show itself.

By comparison, the second season of "Stranger Things" had just two promotional tie-ins, one with Lyft and another with Kellogg’s Eggo.

The media coverage around the deals, which were covered by major outlets like The New York Times, advertising and Hollywood trades, and extensively by Business Insider, may have pulled too much attention from the show itself.

"They didn’t just dip their toe in with ‘Stranger Things,’ they jumped into the pool," one marketing exec said. "They were moving so fast in developing partnerships, and when leadership took a look under the hood they didn’t like what they saw … The story became more about the partnerships and less about the IP and, Netflix is all about protecting its IP."

Netflix is still pursuing promotional partnerships and licensing deals. But it seems to be prioritizing fewer, bigger deals around its most popular properties.

Netflix is under pressure to figure it all out.

Despite concerns from some, every brand and agency that Business Insider spoke with said it would work with Netflix again if the right opportunity came along.

They also said they expected their relationships with Netflix to evolve as Netflix builds out the team managing those deals.

Former BBC Studios exec Jackie Lee-Joe is set to become Netflix’s CMO next month, which could mean changes to the existing approaches, as well.

The agency execs that Business Insider spoke with said the interest from clients is broader than Netflix. Brands want to work with all the major streaming platforms.

With new services on the way from companies like Disney that have long-standing relationships with advertisers, Netflix is going to be under more pressure to figure its own strategy out.

Are you a Netflix insider or partner with a tip? Let me know at ARodriguez@businessinsider.com

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