Netflix Rolls out First Ad-Supported Subscription Model in Select Markets

Netflix Rolls out First Ad-Supported Subscription Model in Select Markets

Published: October 20, 2022

On October 13, Netflix revealed more details regarding its ad-supported subscription tier called "Basic with Ads" during a virtual press conference.

As we reported, the rollout will begin in November and encompass 12 different markets.

The multiphase rollout starts on November 3 in the US, where users will be able to subscribe to the "Basic with Ads" tier for $6.99.

The release coincides with the holiday season, precisely when media budgets are expected to reach record heights, especially in the ad-based VOD segment.

Netflix hopes to make up for the losses incurred due to decaying growth rates amidst rising inflation.

The streaming giant's ad-supported subscription tier will come at a more accessible price than what Disney+ had in mind.

Disney's current $7.99 entry-level tier will include ads starting in December, and the users will have to pay more for the ad-free experience.

"We believe, with this launch, we'll be able to provide a plan and a price for every Netflix fan," explained Greg Peters, Netflix's chief operating officer, on the call.

The platform will offer more or less the same content catalog it already does, except for a couple of cases where licensing agreements are yet to go through.

Netflix will rely on the services of DoubleVerify, Integral Ad Science and Nielsen to help brands track relevant metrics and the success of their advertising campaigns.

"This is a chance to reach a diverse, highly engaged audience, including younger viewers who increasingly aren't watching linear TV," said Jeremi Gorman, president of worldwide advertising at Netflix.

For the time being, Netflix will only run 15 and 30-second ads and display a timer akin to one users see on YouTube. Political, policy and smoking-related ads are not allowed on the platform, while brands will be able to control the display of ads that involve violence, sex and nudity.

Netflix has already sold out most of its ad inventory on a fixed-price basis rather than running auctions.

In terms of the ad tech vendor, Netflix relies on Microsoft's Xandr which should help the platform create a more innovative ad model down the line.

"What we do at launch will not be representative of the long-term opportunity of what the product will be," Gorman said. "We'll be fixed price at first but our roadmap is to be determined and we'll continue to innovate and lead in the space."

The quality of content for the ad-supported subscribers will be limited to 720p, just as it is for the $9.99-tier subscribers.

This is a revolutionary step for streaming services and advertisers and is likely going to cut into traditional TV ad revenue.

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