Netflix Inc said it will introduce a low cost streaming plan with advertising for roughly $7 per month in November in order to attract new subscribers.
The subscription price for the Basic with Ads plan at $6.99 is $3 less than Netflix’s lowest-priced tier without advertisements. Netflix will roll out the new option in 12 countries including the United States, Brazil, Germany, Japan and Korea, over 10 days.
Netflix will add roughly four to five minutes of advertising per hour in order to generate enough revenues. Netflix said newly released films will have limited advertising to preserve the cinematic experience.
About 5-10 percent of Netflix’s programming will not be available on the ad-supported video streaming because of licensing restrictions, Netflix Chief Operating Officer Greg Peters said.
Greg Peters declined to estimate how many customers would sign up for the ad-supported plan or how much additional revenue Netflix might generate. The video streaming company will provide forecasts for the fourth quarter when it releases earnings on Tuesday.
Cowen & Co analyst John Blackledge, in a research note, said the addition of advertising offered a significant opportunity to unlock member growth among price-sensitive audiences.
Netflix had set a goal of 13.3 million ad-supported viewers in the United States by the third quarter of 2023, Wall Street Journal report said.
Rival streaming services such as Walt Disney’s Hulu and Disney+ and Warner Bros Discovery’s HBO Max already have, or plan to offer, ad-supported options that cost less. Those services charge between $8 and $10 per month for plans with commercials.
Netflix 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 1 million customers in the third quarter.
The ad-supported plan from Netflix will debut in Canada and Mexico on Nov. 1, and in the United States, Brazil, United Kingdom, France, Italy, Germany, Australia, Korea and Japan on Nov 3. Spain will follow a week later on Nov. 10.
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 automakers, consumer packaged goods companies and luxury brands.
Netflix is introducing third-party verification to confirm ad impressions and traffic. Ratings agency Nielsen will also provide audience measurement, starting next year.