Netflix Inc said Thursday it will launch a streaming plan with advertising for about $7 a month in November, a move to attract new subscribers after the company lost customers in the first half of the year.
The cost of $6.99 for the Basic with Ads plan is $3 less than Netflix’s lowest tier without ads. The new option will be rolled out in 12 countries over 10 days, including the United States, Brazil, Germany, Japan and Korea.
According to Netflix, subscribers to the plan see about four to five minutes of advertising per hour. Newly released films are only promoted in a limited way in order to preserve the cinema experience.
About 5 to 10 percent of Netflix programming will not be available on the ad-supported alternative due to licensing restrictions, Netflix chief operating officer Greg Peters told reporters.
Shares of Netflix rose 5.4 percent to $232.86 in late afternoon trading. Shares of the company had fallen 62 percent this year prior to Thursday’s announcement.
For years, Netflix executives had been firmly opposed to including commercials on their service. They announced a change of heart in April when the company stunned Wall Street by losing subscribers in the first quarter and forecasting more exits.
“At Netflix, we have a huge opportunity to grow our unit and get more subscribers. And part of that is having a wide range of pricing plans,” Peters said Thursday.
Peters refused to estimate how many customers would sign up for the ad-supported plan or how much additional revenue Netflix could generate. The company will provide guidance for the fourth quarter when it reports earnings on Tuesday.
Cowen & Co analyst John Blackledge said in a research note the addition of advertising presents a “significant opportunity to unlock membership growth” among price-conscious audiences.
He pointed to a Wall Street Journal report that Netflix has set a target of 13.3 million ad-supported viewers in the United States by the third quarter of 2023.
Other streaming services, including Walt Disney Co’s Hulu and Disney+ and Warner Bros Discovery’s HBO Max, already have or plan to offer ad-supported options that cost less. These services cost between $8 and $10 per month for plans with advertising.
Netflix, known for hits like “Stranger Things” and “Squid Game,” reported 220.7 million paid subscribers in June, down nearly 1.2 million from earlier in the year. The company forecast that it would add 1 million customers in the third quarter.
Netflix’s ad-supported plan will launch November 1 in Canada and Mexico, and November 3 in the United States, Brazil, United Kingdom, France, Italy, Germany, Australia, Korea and Japan.
Spain will follow a week later on November 10th.
“They’re very well positioned because they’re a premium brand and marketers are extremely keen to target quality content,” said Greg Kahn, a former advertising industry executive who now runs a media consulting firm.
Kahn predicted that the new ad-supported service would likely result in some price-conscious subscribers opting for the cheaper tier, but added, “There’s a lot more potential to generate revenue and attract a new subscriber base.”
Jeremi Gorman, Netflix’s president of global advertising, said that Netflix nearly sold out its ad inventory for the launch of the new tier, sparking interest from automakers, consumer goods companies and luxury brands.
Advertisers can target viewers by country or genre, or run commercials on the service’s top 10 shows. Brands can also opt out of displaying content depicting graphic violence, sex, or nudity, Gorman said. Netflix is also introducing third-party verification to confirm ad impressions and traffic. The rating agency Nielsen will also offer range measurements from next year.
https://www.independent.ie/business/world/netflix-ad-supported-plan-to-launch-in-november-42066020.html The ad-supported Netflix plan is scheduled to launch in November