Netflix, the largest streaming service in the world by subscriber numbers, is about to introduce advertising on its platform. The streaming giant plans to introduce ads on a cheaper subscription plan to viewers.
This is a big shift as Netflix has never run ads on its platform, and subscribers are still unclear about this new development.
Netflix faces numerous challenges like password sharing, which leads to lost revenue. Moreover, most subscribers stream Netflix with a VPN to bypass its geo-restrictions, another problem the streaming service has to tackle.
However, the biggest concern is not just maintaining subscribers but enticing new ones to sign up, including those sharing passwords. The streaming platform was against introducing ads on the platform, but a change in approach was inevitable after the company’s Q1 report.
Netflix lost subscribers for the first time in ten years, a huge development considering the high competition in the streaming industry. The company immediately went full steam with plans to launch an ad-supported plan by late 2022 or early 2023.
In the same statement, Netflix stated it expected to lose more subscribers from the initial 200,000 to 970,000.
The company plans to test the service in some markets with a significant ad spend before rolling it out globally. Their strategy is to put the plan in motion, listen and get an insight into improving the offering. Netflix expects its advertising business to improve in the next couple of years quickly.
Netflix announced the ad-supported plan in April 2022, adding to the basic, standard, and premium plans. The company chose Microsoft as the global advertising and sales partner.
There were other options for the ad plan, including partnering with Google, but the company settled with Microsoft. The technology company offered to develop innovations in technology and sales while maintaining subscribers’ privacy.
Netflix is not the only streaming company introducing an ad-supported plan to the platform, as HBO Max and Hulu are already doing it.
However, Netflix’s biggest concern is Disney Plus which plans to launch an ad-supported subscription tier later this year. Disney Plus is better positioned because it owns TV channels and streaming platforms with ads, i.e., ABC+, Hulu, and ESPN Plus.
Details of the Netflix Ad-Supported Plan
Netflix has kept the information on the impending ad-supported plan under wraps, but here’s what we’ve gathered.
On price, the Netflix ad-supported plan will cost anywhere between $7 to $9 per month. As expected, the ad-supported plan will be cheaper than the other plans, i.e., basic costs $9.99, standard costs $15.99, and the premium plan costs $19.99/month.
The company plans to show four minutes of advertisements for one-hour programming, which is more or less the same as the competitors. The ads will show before and during a show, not after the end of an episode or film.
It’s expected that those subscribing to the cheaper ad-supported plan will initially have limited access to the catalog because of licensing deals. However, the company will allow downloading content for offline viewing on the new cheaper plan. Also, Netflix won’t show ads on kids’ content and its original movie and series productions.
Reasons Why The Introduction of Ads on Netflix is Planned
Netflix is introducing a new ad-supported plan to attract new customers and boost revenues, a well-calculated move after increasing the prices.
The company lost subscribers in early 2022 as most people couldn’t afford the higher subscription prices because of the rising cost of living. Also, the new ad-supported plan aims to curb the number of users sharing passwords.
What It Means for Netflix and Advertisers
The new development from Netflix to run ads on its platform gives advertisers a great opportunity to reach a worldwide audience. Netflix has the most subscribers, and advertisers will line up on the platform to boost their products and services sales.
Access to Many Viewers
Despite losing a significant number of subscribers, Netflix still has many streamers on its platform, 220.67 million to be exact. A good number of these subscribers share their accounts with others. But Netflix is also trying to curb this trend with the ‘add a home’ feature that costs an additional $3/mo for every home.
Keeping subscribers is Netflix’s main goal, and the ad-supported plan allows advertisers to place their brands and products in front of a large audience. The ad-supported and cheaper plan will increase subscribers.
Brands Will Grab the Audience’s Attention
The best thing about running ads on a streaming platform like Netflix is getting the audience’s complete attention. So, advertisers won’t focus on grabbing the audience’s attention but instead on the selling part.
Netflix is one of the world’s most recognizable brands, and advertising on the platform establishes brand trust and authority, which are essential for growing ROIs.
Netflix is a big brand and will have no problem finding advertisers as they’ll line up to get a slice of the large user base. The company will make money in two ways, by attracting new subscribers to the low-priced ad-supported plan and from advertisers.
Netflix will make more money, and advertisers will increase their sales as subscribers pay lower fees while enjoying better content.
The introduction of ads on Netflix is a well-thought-out plan and wasn’t a knee-jerk reaction to losing close to a million subscribers. The new ad-supported plan is an addition to the three already on the platform. Only the users who choose the cheaper plan will see ads run on their content.
Only time will tell if the cheaper ad-supported plan will work in Netflix’s favor.