Netflix announces ad-supported service for $6.99 a month

Following a slump in subscriber numbers in the first half of the year, Netflix is launching a Basic with Ads subscription plan on November 3.

Netflix will charge $6.99 per month for its ad-based subscription plan, compared to $9.99 for a basic plan without ads and $15.49 for a standard plan without ads.

What users will save in dollars they will get in ads. At launch, commercials will be 15 or 30 seconds long and play before and during shows and films. On average, it will mean four to five minutes of advertising per hour.

Basic with Ads will have a video quality of 720p, which is in line with the basic plan without advertising, but lower than 1080p of Netflix's most expensive plan. It will also have a more limited choice of content, with up to 10% of regular Netflix programming unavailable due to licensing restrictions.

Initially, there will be no advertising within kids' shows and new movies to preserve the cinematic experience, Netflix said during a press call. Older movies will have mid-roll advertising.

Netflix is partnering with Microsoft for its ad-supported service. Commercials will be targeted depending on the country and genre, and advertisers will be able to prevent their ads from appearing on content featuring graphic violence, sex, or nudity.

Netflix will have rating company Nielsen to provide audience measurement, which will start next year, and is also introducing third-party verification for ad impressions and traffic.

Promotion for Squid Game, the most popular show on Netflix. Image by Shutterstock.

Netflix said during a media call that it had nearly sold out its ad inventory already, attracting the interest of hundreds of advertisers ranging from automakers to luxury brands.

It said the ad-based plan was expected to have a "neutral to positive effect" on the company's revenue. After adding record numbers of subscribers during the pandemic, the streaming giant has been losing steam afterward.

With 220.7 million paying subscribers globally, Netflix is still the largest streaming service in the world. However, the number of subscribers dropped by 1.2 million in the first half of the year, and the company is facing increasing pressure from rivals that already offer ad-based streaming.

Basic with Ads will be $1 cheaper than ad-based plans offered by Disney+ and Hulu and $3 cheaper than HBO Max with ads.

It will initially be available in 12 countries and first launched in Canada and Mexico on November 1. Australia, Brazil, France, Germany, Italy, Japan, Korea, the UK, and the US will follow on November 3. On November 10, it will launch in Spain.

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