Netflix said on Thursday it will introduce a streaming plan with advertising for US$7/month in November, a move to attract new subscribers after the company lost customers in the first half of the year.
The $6.99 cost for the “Basic with Ads” plan is $3 less than Netflix’s lowest-priced tier without ads. The new option will roll out in 12 countries including the United States, Brazil, Germany, Japan and Korea, over 10 days. South Africa is not among the launch countries.
Subscribers to the plan will see roughly four to five minutes of advertising per hour, Netflix said. Newly released films will have limited advertising to preserve the cinematic experience.
About 5-10% of Netflix’s programming will not be available on the ad-supported alternative because of licensing restrictions, Netflix chief operating officer Greg Peters told reporters.
Shares of Netflix were up 3.9% at $229.44 in afternoon trading. The company’s stock has fallen 62% this year.
Netflix executives had adamantly opposed adding ads to their service for years. They announced a change of heart in April when the company stunned Wall Street by shedding subscribers in the first quarter and predicting additional defections.
“We at Netflix have a huge opportunity ahead to grow our unit and to attract more subscribers. And part of that is having a wide range of pricing plans,” Peters said on Thursday.
Other streaming services including Walt Disney’s Hulu and Disney+ and Warner Bros Discovery’s HBO Max have ad-supported options that cost less or will offer them soon. Those services charge between $8 and $10/month for options with ads.
Netflix, known for hits such as Stranger Things and Squid Game, reported 220.7 million paying subscribers as of June, down nearly 1.2 million from the start of the year. The company projected it would add a million customers in the third quarter. The latest figures will be disclosed when Netflix reports earnings on Tuesday.
The ad-supported plan from Netflix will debut in Canada and Mexico on 1 November, and in the US, Brazil, UK, France, Italy, Germany, Australia, Korea and Japan on 3 November. Spain will follow a week later on 10 November.
Jeremi Gorman, Netflix’s president of worldwide advertising, said Netflix nearly sold out its ad inventory for the launch of the new tier, attracting interest from car makers, consumer packaged goods companies and luxury brands.
Advertisers can target viewers by country or genre, or run ads on the service’s top 10 shows. Brands also can exclude ads from content featuring graphic violence, sex or nudity, Gorman said. Netflix also is introducing third-party verification to confirm ad impressions and traffic. Ratings agency Nielsen will also provide audience measurement, starting next year. — Lisa Richwine and Dawn Chmielewski, (c) 2022 Reuters
