The streaming giant will launch its first less expensive, ad-supported plan next month after Netflix (NFLX stock) executives rejected the idea of showing advertising to users for years.
According to the business, Netflix Basic With Ads will go on sale in the United States on Nov. 3 at 9 a.m. Pacific Time for $6.99 per month. Australia, Brazil, Canada, France, Germany, Italy, Japan, Mexico, South Korea, Spain, the United Kingdom, and the United States will all offer the less expensive option. On November 1st, it will launch in Canada and Mexico first.
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Basic With Ads will cost $3 less than Netflix’s Basic plan, which allows for single-device streaming ($9.99/month in the U.S. now). Prior to the introduction of the ad tier, Netflix’s Basic plan did not support HD, but now both the Basic With Advertisements and the basic without ads will provide video quality of up to 720p HD.
The business previously stated that Netflix’s complete selection of content will not be available under the ad-supported option. According to Netflix Chief Operating Officer Greg Peters, “a small number of movies and TV episodes won’t be available owing to licensing limitations, and we’re going to be working on lowering that over time.” About 5% to 10% of titles will not be accessible on Netflix Basic With Ads, depending on the country, according to Peters. Customers on the ad plan won’t be able to download movies for offline watching either.
The firm witnessed its subscriber count decline in the first half of 2022 due to intense competition and market saturation. Previously, Netflix (NASDAQ:NFLX) has insisted that advertisements were at odds with its ad-free value offer. The goal of Netflix Basic With Ads is to appeal to a new group of budget-conscious customers and to keep the firm competitive against rivals who also provide ad-supported solutions.
According to Peters, the new advertising tier “represents an exciting opportunity for advertisers – the possibility to reach a varied audience, including younger viewers who are increasingly not watching linear TV, in a premium setting with a seamless, high-resolution advertisements experience.”
Peters responded that Netflix (NASDAQ:NFLX) anticipates overall income from the ad-supported tier to be “neutral to positive” compared with the no-ads Basic plan when asked about the possibility of subscribers descending from more expensive ad-free subscriptions. He stated, “From our standpoint, we’re not attempting to guide folks to one plan or the other.
At first, commercials will run before and during TV programs and movies for 15 or 30 seconds (and 20 seconds in Spain). In keeping with the ad loads of Peacock and Disney+ with commercials, the Netflix tier with ads will air an average of 4 to 5 minutes of advertisements every hour. Pre-roll advertisements will only be shown in newly released films in order to “preserve the cinematic experience,” according to Peters.
As the firm eventually intends to target adverts based on such demographic information, Netflix Basic With Ads subscribers will be required to disclose their date of birth and gender when signing up.
In order to gain a jump on Disney+’s ad tier when it launches in December, Netflix (NASDAQ:NFLX) had previously informed ad buyers that the ad-supported plan will open on November 1. The launch date was moved up from the original early 2023 projection Netflix (NASDAQ:NFLX) gave investors this summer.
Netflix hired Jeremi Gorman, chief business officer, and Peter Naylor, vice president of sales, from Snap in August to lead its advertising division.
Netflix, which has an exclusive relationship with Microsoft for ad sales and technology, floated ad costs of $65 per thousand impressions (CPM), which was considered to be a high rate by industry standards and a point from which buyers would bargain lower.
In an interview with reporters on Thursday, Gorman—VP Netflix’s of global advertising—refused to talk about CPM pricing. She stated that “hundreds” of various advertisers, including those in the automobile and consumer packaged goods industries, had helped Netflix (NASDAQ:NFLX) almost sell out its initial launch inventory on a worldwide scale. However, she did not specify which advertisers made up the original mix. Netflix won’t allow some types of advertisements, such as those that promote illicit goods, cigarettes, or political campaigns or topics, according to Gorman.
Industry insiders claim that Netflix (NASDAQ:NFLX) was requesting a minimum of $10 million in yearly advertising expenditure commitments from agencies and looking to lock in the first ad purchase by September 30. The streamer has informed ad buyers that by the end of 2022, it anticipates having 4.4 million viewers worldwide on its ad-supported plan. On Tuesday, October 18, after the market closes, Netflix will publish its third-quarter 2022 profits, according to Peters.
The long-term outlook for Netflix’s ad-supported tier is largely positive according to Wall Street experts. But in the short term, “although we see the ad-supported tier as a [total addressable market] expander,” it’s not obvious that it will produce “significant upside to expectations,” Morgan Stanley analyst Ben Swinburne said in a research note to investors on Thursday.
Advertisers will be able to target their campaigns against the Top 10 TV series on Netflix (NASDAQ:NFLX) in each country as well as specific content categories like action, drama, romance, and sci-fi. But during the initial phase of the ad tier’s implementation, Netflix won’t be allowed to offer adverts based on factors like geography (apart from by nation), age, gender, viewing habits, or time of day.
According to Peters, advertisers would also have the option to have their adverts removed from adult-oriented material if they feel that doing so would be incongruous with their brand. For instance, purchasers will be able to request that their advertisements do not run during content that features sex, nudity, or graphic violence.
In the beginning, there will be no third-party attribution for Netflix’s ad-supported service. Peters claims that the business has agreements with DoubleVerify and Integral Ad Science (IAS) to validate the viewability and traffic legitimacy of advertisements beginning in Q1 2023. According to Peters, Nielsen’s Digital Ad Ratings (DAR) service will begin monitoring Netflix (NASDAQ:NFLX) Basic With Ads in the U.S. “sometime in 2023,” and eventually ad watching will be recorded through Nielsen ONE Ads.
Netflix (NASDAQ:NFLX) had promised ad purchasers that it would establish frequency limitations (how often an ad spot may be presented to a specific viewer) of one per hour and three per day, which is far less than other ad-supported streaming-video providers.
A corporate representative was questioned about whether Netflix (NASDAQ:NFLX) will conduct an upfront presentation in 2023 and responded, “Nothing to discuss at this time, but we will surely find methods to talk and share information with advertisers.”
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Author Valerie Remorosa 
