For those looking for a cheaper way to stream Netflix, your day is coming in November.
Netflix announced that its ad-supported tier — called "Basic with Ads" — will launch in 12 countries next month, with a cost structure varying depending on location. In the U.S. the service will launch on Nov. 3 at 12 p.m. ET for $6.99 a month. Canada and Mexico will be the first to receive the option on Nov. 1.
Ads will appear before and during TV shows and programming. The 15-second or 30-second commercials will account for about 4 to 5 minutes per hour of content. Newly-released movies will only have ads before the programming, and around 5 to 10 percent of offerings will not have them due to licensing agreements.
U.S. customers will now have four price tiers to choose from to watch the streamer, which also include Basic ($9.99 monthly), Standard ($15.49), and Premium ($19.99). The November launch dates mean Netflix will preempt Disney+ with ads offering, which is slated for December 8.
"Diversifying revenue sources by adding a small but growing advertising business to the mix will give Netflix room to reduce churn and keep those relationships similarly monetized when the customer is looking to downgrade," Peter Newman, Insider Intelligence forecasting analyst, said via email.
The company currently has 221 million paid memberships in more than 190 countries, but not all are expected to jump to the ad-supported tier. Netflix is expected to bring in $13.16 billion in subscription revenue in the U.S. by the end of the year, up 10.1 percent year-over-year according to Insider Intelligence. However, its piece of the pie is shrinking, with its overall over-the-top subscription revenue making up 29.3 percent of the market in 2022 compared to 49.1 percent in 2018.
"The new Netflix ad-supported tier will help the streamer to staunch the bleeding of its subscriber totals, but it will pull most users from the company's existing user base instead of expanding the pool of Netflix viewers," Newman said.
Adding advertising, like some of its competitors, gives Netflix a way to lower the cost of service while still making revenue. The company had been asking for high CPMs (cost per thousand — or mille in Latin — the industry standard when it comes to viewership-based pricing) of up to $80, agency sources previously told Cheddar, with the groups hoping to negotiate the rates now. Variety reported Netflix wanted a $10 million minimum commitment in annual ad spending from agencies, per industry sources.
There had been concerns over Netflix's ability to pull off advertising without any experience, but the company beefed up hires including tapping Peter Naylor and Jeremi Gorman to run the division, previously from Snap. Naylor had also run sales for Hulu, while Gorman had been instrumental at Amazon.
The company also announced partnerships with DoubleVerify and Integral Ad Science (IAS) to verify ads are viewed and watched by real audiences, which should begin in Q1 2023. Nielsen's Digital Ad Ratings (DAR) will also provide viewership numbers for brands. Users will have to input age and gender, which will eventually be used for targeting. However, Netflix says all data will only be used by the platform for its ad purposes and not shared with third-parties.
"Over the past decade, the team at Netflix has done a tremendous job building one of the most popular streaming services in the world," Mark Zagorski, DoubleVerify CEO said in a statement. "As we continue to expand our coverage across premium video and CTV environments, DV is thrilled to extend our third-party verification solutions across their platform, ensuring campaigns meet key quality criteria while maximizing performance and outcomes for advertisers."
Netflix will announce more on the ad-supported option when it reports its third quarter earnings after the close of markets on Oct. 18.