Netflix will launch its cheaper ad-supported tier next month, at a price point that’s less than half the cost of its standard plan.
Netflix with ads will cost $6.99 per month in the U.S., and will launch in 12 countries beginning in November, the company said Thursday. The new plan, officially called “Basic With Ads,” will complement its existing ad-free plans: Basic ($9.99 per month), Standard ($15.49), and Premium ($19.99). Other countries will have local pricing, all at effectively the same price point.
“We believe that with this launch we will be able to provide a plan and a price for every Netflix fan,” Netflix COO Greg Peters told reporters at a virtual press conference Thursday. “The most important thing for us is that we want to offer consumers choice and for them to figure out what is the best offering for them, and that could mean that some of our existing members shift off [of ad-free plans].”
And Peters says that the new model will be in a position to benefit the company financially.
“From a revenue perspective, we are relatively neutral or agnostic on it,” Peters said. “We have generally set out so that the revenue [for] subscription plus ad monetization is neutral to positive to subscription only with no ads.” That would be consistent with other offerings from streaming services like Hulu.
Netflix says that the service will have between 4 and 5 minutes of ads per hour (using 15- and 30-second commercial spots), including preroll ads and commercials within its TV shows and movies. Unlike the other tiers, the ad-supported tier will not allow users to download TV shows or movies. Some titles will not be available at launch due to licensing issues.
There will also be different approaches for different formats. Movies, for example, will get a slightly different experience. “The new movies will just have a preroll, so we will try to preserve that cinematic model there,” Peters said, adding that older films may have some limited ads during the film.
Jeremi Gorman, Netflix’s president of worldwide advertising, said Thursday that Netflix is nearly sold out of all of its inventory, with hundreds of advertisers signed on for the launch.
“It has been amazing to see the overwhelming interest in our ads,” Gorman said, noting that every major category was represented. She added that Netflix will not accept political or policy ads.
And with the launch of the advertising tier will come more transparency around what programs those viewers are watching.
Netflix also said Thursday that Nielsen will measure Netflix viewership in the U.S. through its Digital Ad Ratings (DAR) product beginning in 2023. Netflix will eventually be added to Nielsen’s cross-platform measurement platform Nielsen ONE.
Netflix is also working with DoubleVerify and Integral Ad Science to verify viewability and traffic.
Gorman told reporters that the data collected “will only be used to support advertising on Netflix,” and won’t be used to create profiles for targeting elsewhere.
The company says that, at launch, advertisers will be able to target users by country and genre, and marketers will be able to prevent their spots from appearing in programs with content that may not align with their brand. The company will collect the age and gender of users at sign-up, though it will not be targeting based on those factors at launch.
Based on a demo of the tier viewed by The Hollywood Reporter, Netflix’s ad tier will look familiar to anyone who has streamed content on an ad-supported platform. After a user clicks “watch,” the ad will begin playing, with a box in the corner featuring the “Ad” tag and a countdown until the ad is over.
Netflix surprised the entertainment business (and many of its own employees) in April, when co-CEO Reed Hastings announced the plan to get into advertising during its quarterly earnings call.
The company ultimately decided to partner with Microsoft to get the plan up and running as soon as possible (the tech giant is handling all sales and technology for now, though Netflix hired Snap’s Gorman and Peter Naylor to lead its in-house team).
Six months later and the tier is ready to launch, albeit in a fairly basic form. And the deals with Nielsen, DoubleVerify and Integral mark a sea change in terms of transparency for the company, answering one of the biggest questions it has faced since announcing the ad tier.
Peters says that the company is betting that new users will sign up, and others will rejoin the service. As it rolls out password-sharing crackdowns, some of those users may move to the ad tier as well. And, yes, some current ad-free subscribers could downgrade.
Netflix’s ad tier will debut Nov. 1 in Canada and Mexico, with most other countries going live Nov. 3 (including the U.S.), except for Spain, which launches Nov. 10. The U.S., Canada, U.K., Australia, Brazil, Spain, Mexico, Korea, Japan, France, Germany, and Italy are the launch countries, with other countries to follow.
