On-demand video service Netflix will begin offering an advertising-supported subscription tier for $6.99 a month starting on 4 November in a bid to increase its number of subscribers.
Australia is one of 12 countries that will have access to the ‘Basic with Ads’ monthly subscription which is limited to 720p video quality, a reduced library, and no ability to download video to your device.
Adding ads will save users $4 a month compared with the ‘Basic’ package ($10.99 a month) which doesn’t have ads and lets subscribers download video. Netflix also offers a ‘Standard’ plan ($16.99) that allows 1080p streaming, and a 4k-enabled ‘Premium’ package ($22.99).
Greg Peters, Chief Product Officer at Netflix, said the hope is for ads to address the company’s slide in subscription numbers.
“We definitely believe that a lower consumer-facing price with good incremental ads monetisation will enable us to both grow membership and over time build a really significant incremental revenue and profit stream,” he said during a recent media call.
Netflix said it is aiming for around 4-5 minutes’ worth of ads per hour with 15 or 30 second ads before and during videos.
When asked how the company would deliver mid-roll ads without disrupting the narrative flow, Peters said Netflix was using its “internal content tagging teams to find those natural break points so we can deliver the ad”.
Netflix first signalled the inclusion of advertising earlier this year after the revelation that it lost 200,000 subscribers in the first quarter of 2022.
The problem Netflix identified at the time was two-fold: the company is running out of households to expand into, and it has been facing more competition.
Along with adding advertising, Netflix said it would start a crackdown on account sharing to drive up the number of active subscriptions.
It was only a couple of years ago that Netflix CEO Reed Hastings said advertising was unlikely for Netflix, saying “advertising looks easy until you get in it”.
The sudden need for advertising has forced Netflix to move quickly spinning up an advertising sales division along with baking the ad-tech into its service.
To do this, Netflix brought on Jeremi Gorman, former executive at social media company Snap, to be its president of worldwide advertising who last week praised the company for spinning up its advertising product in just six months.
Netflix has partnered with Microsoft for the technology to deliver its ads, along with user verification companies Double Verify and Integral Ad Science.
Where there are ads, there is data collection but Netflix said it is trying to keep the amount of data it gathers fairly light, initially just using date of birth and gender to help demographically target its ads.
Mostly, it seems Netflix wants to make ads content relevant, showing the example of make-up and hair product ads being delivered during the series Emily in Paris.