LOS ANGELES, Netflix Inc (NFLX.O) said on Thursday that it will launch an advertising-based streaming service at around $7 per month beginning in November. This move will bring in new customers after the company’s customers were cut off in the first quarter in the calendar year.
The $6.99 cost of”Basic with Ads “Basic with Ads” plan is just $3 more than the lowest-priced Netflix tier with no commercials. The new plan will be offered across 12 countries, including those from the United States, Brazil, Germany, Japan and Korea for 10 days.
Members of the plan will receive 4 to 5 minutes worth of commercial each hour. Netflix said. Newly released films will be able to show only a small amount of advertising, to ensure the cinematic experience is preserved.
Around 5% to 10 percent of the Netflix content will not be accessible on the alternative that is ad-supported because of licensing restrictions Netflix Chief Operating Director Greg Peters told reporters.
Netflix shares Netflix are up 5.4 percent at $232.86 in trading late into the afternoon. The stock of the company had dropped 62% since the beginning of the year, prior to the announcement on Thursday.
Netflix executives had been adamantly against the introduction of commercials on their service for many years. They made an announcement of a change of mind in April, when the company shocked Wall Street by shedding subscribers during the first quarter of this year and anticipating more departures.
“We at Netflix have a huge opportunity ahead to grow our unit and to attract more subscribers. And part of that is having a wide range of pricing plans,” Peters told reporters on Thursday.
Peters did not provide an estimate of the number of customers who will sign up to the plan that is ad-supported or what additional revenue Netflix could earn. The company will announce projections in the quarter’s fourth quarter, when it reports its earnings report on Monday.
Cowen & Co analyst John Blackledge in a research note noted that the inclusion of ads provided the “significant opportunity to unlock member growth” for price-sensitive customers.
He referenced the Wall Street Journal report that Netflix had set a target of 13.3 million viewers who are ad-supported within the United States by the third quarter of 2023.
Other streaming services, including Disney’s (DIS.N) Hulu and Disney+ and Warner Bros Discovery’s (WBD.O) HBO Max already offer, or are planning to provide, ads-supported options that are less expensive. These services cost between $10 and $8 each month to subscribe plans that include commercials.
Netflix is known for its hits like “Stranger Things” and “Squid Game,” announced 220.7 million paying customers at the end of June, which is down by nearly 1.2 million from the beginning this year. The company predicted it would increase its number of customers during the final quarter of the year.
The ad-supported service by Netflix will be available on Canada as well as Mexico on November. 1 as well as in United States, Brazil, United Kingdom, France, Italy, Germany, Australia, Korea and Japan on November 3.
Spain will arrive a week later, on November. 10.
“They’re very well positioned, because they’re a premium brand and marketers are extremely interested in being aligned with quality content,” said Greg Kahn, a former advertising executive who currently manages a consulting firm for media.
Kahn suggested that the new service that is ad-supported will likely force consumers who are sensitive to price to select the lower price, but Kahn added that “There’s much more potential in gaining revenue and gaining a new subscriber base.”
Jeremi Gorman from Netflix, the head of global advertising, claimed Netflix has sold nearly all of its advertising inventory prior to the debut in the new category. drawing interest from automakers companies that sell consumer goods as well as luxury brand names.
Advertisers may target viewers based on genre or country or even run ads on the top 10 shows. Brands also have the option of excluding ads that contain graphic violence, sexual sex, or sexuality, Gorman said. Netflix is also introducing third-party verification that can verify the number of impressions and traffic. The rating agency Nielsen will also offer measurements of the audience starting the next year.
