The time has finally come. Today, Netflix hosted a press call to unveil a preview of its new ad-supported tier, “Basic with Ads,” which will launch on November 3rd and cost $6.99 per month, $13 less than the Premium plan of Netflix. This is in line with reports that the new plan will be $7-$9.
In addition, Nielsen will be Netflix’s audience measurement partner, a surprise change since Nielsen has been criticized for reporting inaccurate streaming data.
The cheapest tier will be available in 12 markets to start, including the US, UK, Canada, Mexico, France, Germany, Italy, Spain, Australia, Japan, Korea and Brazil.
The launch date confirms reports that the ad tier will launch in 2022, as opposed to Netflix’s previous announcement that it would launch in early 2023. The streaming giant will beat rival Disney+ by a month, which is launching the plan backed by ads to $7.99 per month on Dec. 8, alongside an ad-free plan price increase.
Not only will Netflix be slightly cheaper than Disney+ – every dollar counts – but all of Netflix’s ad-free programming will remain the same price.
In its announcement today, Netflix wrote: “While it’s still very early days, we’re pleased with the interest from both consumers and the advertising community — and couldn’t be more excited about what’s ahead. As we learn and improve the experience, we expect to roll out to more countries over time.”
But there are some disadvantages. While subscribers can enjoy various Netflix titles at a lower price while streaming to multiple devices at the same time, the company has yet to work out the rights for various shows and movies.
“A limited number of movies and TV shows will not be available due to licensing restrictions, which we are working on,” the company added.
During the press call, Greg Peters, Chief Operating Officer, Netflix, said that the percentage of unavailable titles varies from country to country. At launch, about 5 to 10% of Netflix’s catalog will be missing from the ad-supported plan. “We will work to reduce that number over time,” Peters said.
Netflix previously told investors it was renegotiating deals with media companies.
Netflix also confirmed earlier reports that offline viewing would not be available, which is typical of many ad-supported video-on-demand (AVOD) services.
Like the basic Netflix plan, the ad-supported tier will have 720p HD video resolution, while the basic and premium plans have 1080p HD video. Basic tier subscribers also lack 4K viewing, which is only available to premium viewers.
Each ad will be only 15 or 30 seconds long, which will run before and during shows and movies. On the bright side, new Netflix movies on the service will have pre-roll ads and no intermissions. However, older movies will have ads during the video as well as ads before the video.
There will be limited ad load at an average of 4-5 minutes of ads per hour, which is Disney+’s plan.
Netflix agrees to partner with Nielsen
Marketers will likely be happy that the streamer will have partners other than Microsoft.
Nielsen will use digital ad ratings in the United States and eventually report Netflix ratings through Nielsen ONE Ads. The report will begin “sometime in 2023,” Netflix wrote.
Nielsen has measured television viewing on Netflix since 2017, however, it has been accused of reporting numbers different from Netflix’s own reports.
Netflix also worked with DoubleVerify and Integral Ad Science to “verify viewability and traffic validity” of the ads, the company added.
Yesterday, Netflix signed up British TV ratings agency Broadcasters Audience Research Board to measure Netflix’s UK streaming numbers – a surprising move for a streaming service that is notoriously tight-lipped about viewing data.
Netflix hopes it can gain ad revenue after a tough quarter in July, with a painful loss of 970,000 subscribers.
Earlier this week, JP Morgan analyst Doug Anmuth estimated that in 2023, Netflix could gain 7.5 million subscribers at the ad-supported level in the US and Canada, which could lead to sales of 600 million advertising dollars. By 2026, Anmuth predicted the streamer would grow by 22 million subscribers in the region, along with $2.65 billion in ad sales.
The streamer has also tried other monetization strategies, including several rounds of layoffs and a paid sharing offer that will roll out to all markets next year.
While Netflix probably doesn’t want the majority of its 220 million subscribers to downgrade to its ad-supported plan, many consumers will likely opt for the cheaper tier. Comcast found that 80% of viewers would prefer to subscribe to an ad-supported service over a price-based ad-free service.
Technology research group Omdia suggests that nearly 60% of global Netflix subscribers will opt for the ad-supported tier. If a larger portion of current subscribers are downgraded to the cheaper tier, the streamer may experience a decline in subscription revenue.
Peters claimed, “We’re not trying to steer people towards one plan or another, we really want to take a pro-consumer approach and let them land on the right plan for them. And we think the revenue model will be good as a result.”
The announcement comes on the heels of Netflix’s Q3 earnings results, which will be announced next week on Tuesday, October 18.