Oct 13, 2022 - Economy

Netflix launching ad-supported tier in U.S. on Nov. 3 for $6.99

Gif of Netflix flexing

Illustration:Rebecca Zisser/Axios

After years of avoiding putting ads on its service, Netflix on Thursday said it finally plans to debut an ad-supported tier on Nov. 3 in 12 countries for $6.99 monthly, including the U.S.

Why it matters: The rollout comes as Disney continues to challenge Netflix's dominance globally. Netflix is launching its ad-supported tier roughly a month ahead of Disney's ad-supported tier, and for $1 less per month.

  • Asked if Netflix priced its tier to be competitive with Disney's ad-supported tier, Netflix's chief operating officer Greg Peters said, "Generally we're not heavily anchoring off of the competitive set." Rather, Netflix's calculus is based on "what is the entertainment value that we are delivering to members."

Details: Netflix's ad-supported tier will offer nearly all of the same shows and movies as Netflix's three-tier without ads, and it will be available on nearly all of the same devices that a consumer today can use to watch Netflix.

  • The tier will launch on Nov. 1 in Canada and Mexico, followed by Australia, Brazil, France, Germany, Italy, Japan, Korea, the U.K. and the U.S. on Nov. 3. It will launch in Spain on Nov. 10.
  • Netflix executives said consumers can expect "similar pricing" in other counties as what will be available in the U.S.

Yes, but: A very small minority of viewing — "in the 5–10% range" — of content won't be available on the service at its debut due to licensing restrictions, Peters said.

  • "We did deals in a timeframe before when we weren't contemplating doing an ad-based tier," Peters said. Netflix is still redoing licensing deals to add rights for advertising, he added. "We feel like we've got a very strong offering in terms of the amount of titles."
  • Additionally, subscribers of the ad-supported tier will not be able to download content.

How it works: Existing Netflix subscribers will remain in their current plan at the same price, unless they choose to switch to the new ad-supported plan, Peters said.

  • The new ad-supported tier will launch alongside Netflix's existing basic, standard and premium plans.
  • At launch, viewers can expect a video that will either be 15 seconds or 30 seconds long that will play at the beginning and in the middle of each piece of content.
  • Netflix's new president of advertising, Jeremi Gorman, said the company is eyeing a "very light ad load with no more than four to five minutes of ads per hour."
  • Netflix said it will collect date of birth and gender user data when they sign up for the service "to help us show more relevant ads over time." But the company says it will not use that data at launch to target ads, and it will ensure the data is kept private and only used by itself and partners, like Microsoft, to improve the ad experience for the user.

Between the lines: The company also announced a few new partners to get the tier up and running quickly. Gorman confirmed reports that Netflix will partner with Integral Ad Science and DoubleVerify to help ensure the ads are actually delivered appropriately.

  • She also noted that the company will partner with Nielsen to measure Netflix's content consumption and to help advertisers measure the effectiveness of their ads on Netflix in 2023.
  • Gorman said that Netflix has "thousands" of advertising partners at launch and that it's nearly sold out of all of its ad inventory. Gorman declined to say how much advertisers were paying to place ads.
  • At launch, Gorman also said that demographic targeting wouldn't be used to target ads, but that Netflix will move into more highly targeted ads, based on demographics and user behavior "over time."
  • Netflix will not accept political ads, Gorman added.

The big picture: Netflix's ad-supported tier comes as it faces pressure from Wall Street to post more profits as its subscriber growth slows. Other streaming services, like Hulu, have long relied on ad-supported tiers to increase the amount of revenue they make per subscriber.

Go deeper: Netflix feels the heat

Go deeper