The time has finally arrived. Netflix held a press conference today to reveal a preview of its new ad-supported tier, “Basic with Ads,” which will launch on November 3 in nine countries, including the United States, and will cost $6.99 per month, $13 less than Netflix’s Premium plan. This corresponds to reports that the new plan would cost $7-$9.
Furthermore, Nielsen will be Netflix’s audience measurement partner, which is surprising given Nielsen’s history of reporting inaccurate streaming data.
To begin, the lower tier will be available in 12 markets. Subscribers in Canada and Mexico will be the first to test the new plan on November 1. On November 3, it will be available in the United States, the United Kingdom, France, Germany, Italy, Australia, Japan, Korea, and Brazil. When the cheaper tier launches on November 10, Spain will be the last to experience it.
The launch dates confirm previous reports that the ad tier would be available in 2022, as opposed to Netflix’s previous announcement that it would be available in early 2023. The streaming giant will be one month ahead of rival Disney+, which will launch its ad-supported plan at $7.99 per month on December 8 in tandem with a price increase for its ad-free plan.
Not only will Netflix have a slightly lower priced tier than Disney+—every dollar counts—but all of Netflix’s ad-free plans will also remain the same price.
“While it’s still very early days,” Netflix wrote in today’s announcement, “we’re pleased with the interest from both consumers and the advertising community — and couldn’t be more excited about what’s ahead.” We expect to launch in more countries as we learn from and improve the experience.”
However, there are some drawbacks. While subscribers can enjoy various Netflix titles at a lower price while simultaneously streaming on multiple devices, the company has yet to finalize the rights to various shows and movies.
“Due to licensing restrictions, which we are working on,” the company added, “a limited number of movies and TV shows will not be available.”
During today’s press conference, Netflix Chief Operating Officer Greg Peters stated that the percentage of unavailable titles varies by country. At launch, the ad-supported plan will exclude approximately 5 to 10% of Netflix’s catalog. “We’ll work over time to reduce that number,” Peters said.
Previously, Netflix informed investors that it was renegotiating contracts with media companies.
Furthermore, Netflix confirmed earlier reports that offline viewing would be unavailable, as is common for many AVOD (ad-supported video-on-demand) services.
The ad-supported tier, like the Netflix basic plan, will have 720p HD video, whereas the standard and premium plans will have 1080p HD video. Basic tier subscribers also do not have access to 4K viewing, which is only available to premium subscribers.
Each advertisement will be 15 or 30 seconds long and will run before and during shows and movies. On the plus side, new Netflix movies will have pre-roll ads rather than interruptions. However, older films will receive both mid-roll and pre-roll advertisements.
The ad load will be limited to an average of 4-5 minutes of ads per hour, which is also the plan for Disney+.
During the call, Jeremi Gorman, Netflix’s president of worldwide advertising, boasted that hundreds of advertisers had signed up for the launch and that Netflix’s inventory was nearly sold out.
Gorman also stated that the streamer does not accept political or policy advertisements.
Netflix agrees to work with Nielsen
Marketers will most likely be relieved that the streamer will be supported by companies other than Microsoft.
Nielsen will use its Digital Ad Ratings in the United States and, eventually, Nielsen ONE Ads to report Netflix ratings. The reporting will begin “sometime in 2023,” according to Netflix.
Nielsen has been measuring TV audiences on Netflix since 2017, but the company has been accused of reporting numbers that differ from those provided by Netflix.
According to the company, Netflix also collaborated with DoubleVerify and Integral Ad Science to “verify the viewability and traffic validity” of the advertisements.
Marketers will most likely be relieved that the streamer will be supported by companies other than Microsoft. Netflix signed a deal with British TV ratings agency Broadcasters Audience Research Board to measure its streaming numbers in the United Kingdom yesterday, a surprising move for a streaming service that is notoriously tight-lipped about its viewership data.
Netflix is hoping to generate revenue through advertisements following a difficult quarter in July that saw it lose 970,000 subscribers.
JP Morgan analyst Doug Anmuth estimated earlier this week that in 2023, Netflix could gain 7.5 million subs to its ad-supported tier in the United States and Canada, resulting in $600 million in advertising sales. Anmuth predicted that by 2026, the streamer would have 22 million subscribers in the region and $2.65 billion in advertising sales.
The streamer has also tried other revenue-generating strategies, such as several rounds of layoffs and a paid sharing offering that will be available in all markets next year.
While Netflix is unlikely to want the majority of its 220 million subscribers to downgrade to its ad-supported plan, many customers are likely to choose the lower-cost tier. Comcast discovered that 80% of viewers would prefer to subscribe to an ad-supported service over a more expensive ad-free service.
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According to the technology research firm Omdia, nearly 60% of global Netflix subscribers will choose the ad-supported tier. If the majority of current subscribers downgrade to the lower-cost tier, the streamer’s subscription revenue may suffer.
“We’re not trying to steer people to one plan or the other,” Peters stated. “We really want to take a pro-consumer approach and let them land on the right plan for them.” As a result, we believe the revenue model will be fine.”
The announcement comes ahead of Netflix’s third-quarter earnings report, which will be released next Tuesday, October 18.
