Netflix to release cheaper subscription plan with ads in November

Written on 10/14/2022
Editor BizNews

Netflix will charge $6.99 a month for its new ad-supported tier of service when it debuts next month, the company said Thursday.

In its first quarter earlier this year, Netflix lost monthly subscribers due to an increase in competition from other streaming platforms, and people moving onto other things after being allowed to leave their homes for the first time since the pandemic began. The pandemic caused monumental growth for Netflix as more people chose to watch movies and series as there were fewer leisure options on offer. This caused pandemonium for the stock price, which fell more than 35% in a day in April. Netflix then began to crack down on account sharing, in the hope of getting users in different households to each pay for their own accounts and bolster the numbers. The streaming platform also looked to introduce something which it had been against for years: an advertising model. And that very model will be introduced in November this year. More in this article from The Wall Street Journal. – Ross Sinclair 

Netflix’s Ad-Supported Plan Will Launch in November at $6.99 a Month

Plan will feature four to five minutes of commercials an hour before and during content

By Sarah Krouse

Netflix Inc. will charge $6.99 a month for its new ad-supported tier of service when it debuts next month, the company said Thursday, releasing the plan a month before the launch of Disney+’s ad-backed streaming tier and for one dollar less.

Netflix said the new tier, called “Basic with Ads,” will initially be available in 12 countries including the U.S., U.K., Canada, Germany, Japan, Brazil and Australia, though it plans to launch more broadly over time. The ad-supported tier will launch in those initial markets globally in stages between Nov. 1 and 10, the company said.

The launch, seven months after Netflix said it would enter the ad business, shows the urgency with which the streaming giant is trying to attract new customers and improve its average revenue per user. The company reported back-to-back quarters of subscriber losses in the first and second quarters and is scheduled to announce its performance for the September quarter on Oct. 18.

Greg Peters, Netflix’s chief operating officer, said existing subscribers would remain in their current plan at the same price. If existing subscribers want to transition to the ad-supported plan, they can make the change within their account settings.

Walt Disney Co., meanwhile, plans to raise the price of its basic Disney+ plan from $7.99 to $10.99 in December, and those who don’t wish to pay more will start seeing ads.

Netflix’s basic ad-free plan costs $9.99 a month in the U.S. The company also has plans that cost $15.49 and $19.99 a month with varying degrees of simultaneous-viewing limits and better-quality streams. Netflix’s ad-supported tier will have lower resolution for viewers than the $15.49 and $19.99 tiers but will still be high definition.

Netflix’s foray into the ad business does carry risks, including the possibility that a large portion of users decides to pay less in exchange for viewing ads, which would cannibalize its subscriber base.

Mr. Peters declined to say what portion of Netflix’s existing subscribers the company expects to switch to the ad-backed tier, but he said he expected revenue from ad-tier subscribers to be the same or greater than it is from the comparable ad-free plan.

“We’re not trying to steer people to one plan or the other,” he said. Netflix expects some switching from ad-free tiers to the ad-backed plan, as well as a lot of new users joining or rejoining the service. That will help make the tier attractive for advertisers because they will be able to reach large audiences, he said.

Not all of Netflix’s vast library will appear on the ad-backed service, the company said, because of licensing restrictions that it continues to work on. Users also won’t be able to download content as they can on other tiers of service.

The plan will display four to five minutes of ads an hour and ads will typically be 15 seconds or 30 seconds long, playing before and during content. The company said it has nearly sold out its ad inventory at launch.

Netflix is offering advertisers the ability to target ads broadly based on country and genres like romance, science fiction and action, and letting brands opt out of advertising alongside sexual or graphically violent content, the company said.

The streaming giant will collect the date of birth and gender of ad-tier subscribers, more information than it currently asks customers for, and will eventually use that information for ad targeting over time, said Jeremi Gorman, Netflix’s new president of worldwide advertising.

Netflix said it has forged verification partnerships with DoubleVerify Holdings Inc. and Integral Ad Science Holding Corp. to confirm the validity of views, and is working with Nielsen Holdings PLC to help advertisers measure the audiences that saw ads.

The company has raced to learn and enter the ad business after years of saying that Netflix would remain a commercial-free platform. Many advertisers have said they are eager to run campaigns on Netflix because it will help them reach new audiences that spend hours binge-watching TV shows and movies.

Write to Sarah Krouse at sarah.krouse+1@wsj.com

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