Netflix will charge $6.99 per month for its new advertising-supported tier, which the company will roll out in the U.S. on Nov. 3.
Netflix’s “Basic with ads” tier will include an average of four to five minutes of commercials each hour and won’t give users the ability to download movies and TV series. A limited number of TV series and movies will initially be unavailable due to licensing restrictions.
Commercials will be 15 or 30 seconds in length and will play before and during Netflix’s content. Brands will have the ability to prevent ads from appearing on content they deem unsavory or ill-fitting. To help advertisers understand reach, ratings company Nielsen will use its standard digital audience measurement, Digital Ad Ratings, in the U.S. beginning in 2023.
Netflix is launching a less-expensive service with commercials for the first time after years of rejecting the concept. The move comes as subscriber growth has plateaued in recent quarters. Netflix lost subscribers in the first two quarters this year and expects to add just 1 million customers in the third quarter. The company has about 221 million subscribers globally, making it the largest worldwide streaming service.
Netflix will announce its third quarter earnings after the market closes Tuesday and plans to unveil subscriber forecasts for the advertising service, according to Chief Operating Officer Greg Peters. Netflix is partnering with Microsoft for its advertising-supported service. The streaming company will have hundreds of advertisers at launch and has nearly sold out its inventory, the company said in a media conference call.
Pricing below Disney Netflix’s $6.99 per month pricing is less expensive than ad-supported Disney+ and Hulu, which will both be $7.99 per month when Disney+’s ad tier launches in December. HBO Max with ads is $9.99 per month.
Netflix priced the service so that any customer who switches to the ad-supported service from the ad-free basic plan will have a “neutral to positive” effect on the company’s revenue, according to Peters.
That suggests Netflix will get at least $3 a month per user in advertising revenue.
“We want to offer consumers choice and figure out what the best offering is for them,” Peters said during the conference call.
Video resolution for Netflix’s advertising tier will be 720p rather than 1080p, the quality of Netflix’s standard plan that costs $15.49 per month. The company’s basic plan without advertising is $9.99 per month and also has 720p resolution.
The advertising tier will initially be available in Canada and Mexico on Nov. 1, followed by Australia, Brazil, Canada, France, Germany, Italy, Japan, Korea, Mexico, the U.K. and the United State on Nov. 3. Spain will then launch on Nov. 10.