About two years ago, Netflix (Nasdaq: NFLX) stopped selling ad space in those iconic red mailers. The revenue was "inconsequential" anyway, so CEO Reed Hastings diverted that marketing space mostly to promotion of the then-new streaming service instead.
But that's changing again. The last Netflix envelope I got contained a full-color ad for Sharp television sets, with nary a mention of Netflix or Qwikster. Sure, the ad mentions that the TV sets have built-in network connections and "over 100 apps," but stops short of saying that Netflix would be among them.
So what does this mean? Did mailer ads become a viable revenue source again? Is the company getting ready to split off Qwikster with some new ad policies in place? Maybe the streaming service graduated from the need to blare its availability from every available channel?
Pending word from the company itself, I'm thinking it's a combination of all three. When the third-party ads dried up in the spring of 2009, Netflix had just over 10 million subscribers, most of them unfamiliar with digital video streams. Now, about 22 million out of the company's 24 million customers have made the explicit choice to pay for digital streams. Preaching to the choir in order to convert the last 2.2 million foot-draggers seems pointless. Under these circumstances, the ad revenue doesn't have to be huge in order to make sense.
Now, my ears would perk up if we started seeing in-mailer ads for Amazon.com (Nasdaq: AMZN), Microsoft (Nasdaq: MSFT), or Apple (Nasdaq: AAPL) -- all of whom have been pointed out as potential buyers of the whole Netflix bundle or at least the DVD-mailing arm now known as Qwikster. In that case, some kind of deal might be imminent.
Given that Qwikster will start shipping video games soon enough, I'd expect to see industry players including Sony (NYSE: SNE) and Activision Blizzard (Nasdaq: ATVI) buying ad space here. And Microsoft could run Xbox-related ads here without triggering my takeover alarm bells.
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