Netflix Inc. will introduce an ad-supported subscription on November 3, where you will be charged $7 per month for a subscription.
Netflix Inc. will launch an ad-supported plan on Nov. 3, charging $7 per month for a plan that the company says will attract new budget-conscious customers and boost growth.
The cheaper streaming package will debut in the US and 11 other countries, including Japan, France and Brazil, Netflix said Thursday. It will hold four to five minutes of commercials per hour and offer lower video quality than more expensive tiers. Some programs will not be available because the company does not have the rights to advertise them.
Netflix had long positioned its streaming service as an ad-free alternative to cable and has resisted calls to introduce ads. But now that subscriber growth has stalled and inventory has plummeted, the company is looking to the cheaper version of its commercialized service to generate additional revenue.
In a briefing, company officials said they already have hundreds of advertisers and have sold out most of their inventory for the service called Basic with Ads.
The price gives Netflix a competitive product against similar offerings from newer rivals. It’s $3 a month less than the price of the ad-supported version of HBO Max, from Warner Bros. Discovery Inc., and $1 less than the upcoming Disney+ with commercials. The company’s current ad-free plans range from $10 per month for a subscription that allows users to watch on one screen at a time to $20 per month for a high-definition service with up to four screens at a time.
Shares of Netflix rose a whopping 4.4% to $230.51 in New York after the announcement. They are down 62% this year and are heading for their first annual decline since 2014 after peaking at over $700.
“They are pricing aggressively,” Bloomberg Intelligence analyst Geetha Ranganathan said on Bloomberg TV. The new tier will “open up the product to a whole new set of subscribers.”
Netflix is starting with a familiar approach to advertising and plans to adjust its offerings over time. Ads will be 15 to 30 seconds long and will run before and during TV shows and movies, the company said. It plans to use its viewership data to help sponsors target their audiences based on genre and prevent children from seeing inappropriate content.
A major problem for advertisers is audience metrics – the data traditional TV networks use to price their spots. Netflix has partnerships with DoubleVerify and Integral Ad Science to confirm ad visibility and traffic validity as of Q1 2023. Nielsen, the standard bearers of ratings, will also provide data in the US sometime that year.
The company also ensures that viewers don’t see the same ads too often by using frequency caps.
“We are confident that with Netflix starting at $6.99 per month, we now have a price and subscription plan for every fan,” Chief Operating Officer Greg Peters said in a company statement. “While it is still very early, we are pleased with the interest from both consumers and the advertising community.”