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Viewers who choose the $6.99 subscription will be shown four to five minutes of ads for every hour of content they watch.
Netflix’s ad tier is here.
The streaming company on Thursday unveiled the details of its big effort to jump-start subscriber growth after the company’s first-quarter revelation that it had lost paying customers for the first time in a decade. Beginning on Nov. 3 in the United States, Netflix will offer a $6.99 advertising-supported subscription called Basic With Ads, a lower-cost option that will show people four to five minutes of ads per hour of content they watch.
This tier will also be available in 11 other countries in November: Australia, Brazil, Britain, Canada, France, Germany, Italy, Japan, South Korea, Mexico and Spain.
The ads, ranging from 15 to 30 seconds, will play before and during television shows and older films. For new films, the ads will play only before the movie begins.
Subscribers opting for this tier will not be able to download titles for later viewing, a prohibition based primarily on technical challenges. Netflix also indicated that “a limited number of movies and TV shows,” somewhere between 5 and 10 percent of those on the service, wouldn’t be available when the ad tier began because of “licensing restrictions.”
“We believe that with this launch we’ll be able to provide a plan and a price for every Netflix fan,” Netflix’s chief operating officer, Greg Peters, said during a presentation to journalists.
Netflix’s current pricing options won’t change. The basic service, without ads, costs $9.99 a month. The most expensive tier, with the highest-definition resolution, is $19.99.
The advertising is being managed by Microsoft, and Netflix is working with two verification companies to ensure that the ads are being seen as intended. The company also said Nielsen would be able to analyze audience reach and specific viewer demographics in the United States. Those partnerships will begin in 2023.
Jeremi Gorman, Netflix’s newly hired president of worldwide advertising, said advertising on Netflix would give companies a chance to “reach a diverse audience, including younger viewers who increasingly don’t watch linear TV.” To target ads to the proper audience, Netflix will collect information on gender and birth date from people opting for the cheaper option.
Netflix also hopes the tier will bring in new customers and perhaps encourage those who have been sharing passwords with friends and family, a user number the company believes could be as high as 100 million, to stop using others’ accounts and pay for their own.
“I think it’s a really relevant and complementary approach because obviously whatever we do with password sharing, having people be able to land in a lower-price offering is a great way to give them a chance to find Netflix and pay for it consistent with that model,” Mr. Peters said.
The advertising strategy, first announced in April by Netflix’s co-chief executive Reed Hastings, is a significant change for a company that swore off ads for years, opting instead for “the simplicity of the subscriber model.” But Mr. Hastings, in making the initial announcement, said: “As much as I am a fan of that, I am a bigger fan of consumer choice. And allowing consumers who would like to have a lower price, and are advertising tolerant, to get what they want makes a lot of sense.”
Netflix isn’t the only streaming service to introduce ads after earlier swearing off the revenue model. Disney+ will introduce its advertising tier on Dec. 8, for $7.99 a month. The ad-free model, soon to be named Disney+ Premium, will cost consumers $10.99 a month, a 38 percent increase from the current price.
For existing Netflix customers, the programming will not change at all. Those looking for the cheaper tier will have to choose it. Mr. Peters said the company didn’t intend to steer users to one tier over another: “We want to take a pro-consumer approach and let them land on the right plan for them. We think that the revenue model will be fine as a result.”
Nicole Sperling is a media and entertainment reporter, covering Hollywood and the burgeoning streaming business. She joined The New York Times in 2019. She previously worked for Vanity Fair, Entertainment Weekly and The Los Angeles Times. More about Nicole Sperling
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