How much will Netflix’s new ad-supported plan cost and what you get (and what you don’t)

LOS ANGELES — The commercials are coming to Netflix soon.

The Los Gatos streamer said Thursday that it would launch a cheaper ad-supported plan at $6.99 per month starting November 3 in the US. Netflix will still offer ad-free subscriptions, but for people looking for a discount, a total of four to five minutes of commercials will be delivered before and during your favorite shows every hour.

The company said a limited number of shows and movies won’t be available on its Basic with Ads plan due to licensing restrictions, and customers won’t be able to download shows.

The push toward advertising comes years after Netflix resisted putting commercials on its shows. But as the company faced growing competition from rivals such as HBO Max, which offered customers lower-cost, ad-supported subscriptions, some analysts said it was inevitable that Netflix would follow suit.

The company, which remains the dominant subscription streaming service with almost 221 million customers worldwide, is under pressure from investors to keep growing its business. The pandemic saw unprecedented subscriptions for streaming, but since then, Netflix has struggled.

Netflix lost subscribers for two consecutive quarters and laid off hundreds of workers earlier this year to cut costs.

Some analysts believe that Netflix’s move to advertising could increase subscribers, reduce churn and provide an additional revenue stream for the company.

JP Morgan analyst Doug Anmuth estimates the new plans could bring Netflix about $600 million in ad revenue next year in the US and Canada and about $2.65 billion in 2026 in that region.

Anmuth said in a research note that given Netflix’s moderate subscription growth, “advertising is critical to re-accelerating revenue” and driving higher profitability.

By serving ads, Netflix can reach people who are not subscribers. Nine out of 10 adults who don’t have Netflix watch other ad-supported streaming content, according to a recent survey of 2,500 adults by Samba TV and Harris X.

“These audiences are not averse to watching ads in exchange for free or reduced-price content and are prime candidates for switching to Netflix’s new ad-supported level,” Samba TV CEO and co-founder Ashwin Navin told The Times. last month.

The cost of an ad-free Netflix subscription is the most expensive for any popular US streaming service. Netflix ad-free monthly plans range from $9.99 to $19.99. That compares to ad-free HBO Max and Hulu at $14.99 a month.

Disney+ will launch an $8 ad-supported monthly plan on December 8. At that point, the cost of an ad-free plan will go up to $11 per month. Launching its ad-supported plan before Disney+ could give Netflix a head start in courting advertisers.

For customers who opt in to ads on Netflix, ads will appear 15-30 seconds before and during their shows.

Netflix’s ad-supported plans will launch next month in 12 countries, including the US, Australia, Brazil, Canada, France, Germany, Italy, Japan, Korea, Mexico, Spain and the UK.

“In short, Basic with Ads is everything people love about Netflix, at a lower price, with a few ads in between,” Netflix COO Greg Peters wrote in a statement. “Basic with Ads also represents an exciting opportunity for advertisers – the chance to reach a diverse audience, including younger viewers who are watching less linear TV, in a premium environment with a seamless, high-resolution ad experience” .

Some analysts are skeptical about whether an ad-supported plan will significantly drive customer growth, or drive ad-free customers to less expensive plans.

Jeffrey Wlodarczak, director and analyst at Pivotal Research Group, calls Netflix’s move to advertising “defensive, not offensive.”

“We also believe that a low-cost, ad-supported version of NFLX [Netflix] it arguably pollutes the NFLX brand and the technology behind successful ad delivery is very difficult…not to mention NFLX original programming is not optimized for ad breaks,” Wlodarczak wrote in a research note. It has a sell recommendation on the stock.

Netflix has partnered with Microsoft in its advertising efforts. On Thursday, Peters said Netflix has also partnered with DoubleVerify and Integral Ad Science “to verify the viewability and validity of our ad traffic” starting next year.

In addition to growing competition from rival streaming services, Netflix is ​​also facing a challenging global economy.

Kenneth Leon, director of research at CFRA Research, warns there could be more headwinds ahead, as consumers may cut back on spending during a recession.

“Although streaming video is considered a valuable and leisure activity, households have too many different types of streaming from Netflix’s formidable competitors besides them,” Leon said. “So we see that the risk is really a recession.”

Netflix will release its third-quarter earnings on Tuesday. The company has said it estimates it will add 1 million subscribers in the third quarter, compared to a gain of 4.4 million subscribers during the third quarter of last year.

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