In 2019, Netflix said in a letter to shareholders “we… are advertising free,” and added that being commercial-free is a “deep part of our brand proposition.”
That all changed Thursday when the streaming leader launched “Basic with Ads,” the platform’s much anticipated ad-supported subscription plan.
The new tier will cost $6.99 a month in the United States where it is now available. It is also being launched in Canada, Australia, Brazil, France, Italy, Germany, Japan, Korea, Mexico, Spain and the United Kingdom at various price points.
The company has said that “current plans and members will not be impacted” and that “’Basic with Ads’ complements our existing ad-free Basic, Standard and Premium plans.”
The new tier will have most of what’s available with Netflix’s current $9.99 a month Basic plan. However, the “Basic with Ads” option will include an average of four to five minutes of commercials per hour. Those ads will be 15 or 30 seconds in length and will play before and during TV series and movies.
Even though most current subscribers won’t see much of a change — unless they switch to the new plan, of course — the Netflix with ads launch is one of the most significant moments in the company’s 25-year history.
CEO Reed Hastings felt shock waves through Hollywood and Madison Avenue in April when he said that the streaming giant was open to commercials. Hastings had for years been adamant about not putting ads on the platform.
But the company can no longer stick to that strategy. Netflix (NFLX) has had an awful year. The platform lost subscribers for the first time in more than a decade and had its stock plummet. Netflix (NFLX) reported last month that it is growing again, but the company needs to show investors that it can bring in revenue even as its subscriber growth has stagnated.
“As we’ve been discussing over the past few quarters, improving our pricing strategy is an important near-term focus,” the company wrote last month, adding that the “reaction from advertisers so far has been extremely positive.”
In July, Netflix announced that it will partner with Microsoft (MSFT) to enhance sales and technology for the new plan.
“We believe that more choice, especially for more price conscious consumers, will translate into meaningful incremental revenue and operating profit over time,” the company said last month. “That said, it’s still very early days and, since we’re keeping our existing plans ad-free, it will take us time to build up our membership base and the associated ad revenue.”