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Netflix Inc. announced Thursday that its new ad-supported tier will debut Nov. 3 in the U.S. for $6.99 a month.
“We’re excited to launch Basic with Ads — Netflix’s lower priced ad-supported plan — in November,” Netflix
NFLX,
Chief Operating Officer Greg Peters said in a brief statement. The service will be available in Canada, the UK, Mexico, Australia, Brazil, France, Germany, Italy, Japan, Korea and Spain between Nov. 1 and 10, the company said.
Subscribers who choose the ad-supported tier will see four to five minutes of ads per hour, with each running about 15 seconds or 30 seconds, before and during content. Netflix said it has nearly sold out its ad inventory for the launch.
Netflix shares are up 5% in late-afternoon trading Thursday.
“The sweet spot for streamers looking to move to an ad supported model is one that offers five minutes or less of advertising per hour and reduces the cost of their subscription by half,” Ashwin Navin, chief executive of Samba TV, told MarketWatch. “This new tier threads that needle nicely.”
“The discounted pricing of Netflix’s ad tier will make it attractive to consumers. But because Netflix is starting from a point where none of its users see ads, it will still take some time before a large portion of Netflix viewers opt into the ad tier,” Insider Intelligence analyst Ross Benes told MarketWatch. “Netflix’s impact on the 2022 streaming ad market will be minimal. But its potential impact in future years is immense.”
The deceleration of Netflix subscribers has allowed The Walt Disney Co.’s
DIS,
younger rival streaming service to catapult into the top spot for now. Disney also plans to introduce ads to its Disney+ streaming service while raising prices for its offerings without ads, with commercials expected to begin on specific plans in December.
Netflix has acted quickly to jack up revenue with initiatives covering a first-time advertising platform, a crackdown on shared passwords, and a foray into videogames — much to the relief of financial analysts.
For more: Netflix is pulling out all the stops to reverse a slide in subscribers
“We think investors are looking ahead to the ad tier rollout (possibly by Nov ’22) & password sharing solution,” Cowen analyst John Blackledge said in a note Oct. 5 that maintained an outperform rating on Netflix shares and a price target of $325. “Our U.S. survey suggests NFLX remains the most popular living room TV option, while TikTok gains mobile share.”
