Netflix has avoided advertising; however, as market competition heats up and consumers become more wary of inflationary increases, they have given in.
Netflix, the subscription based streaming service, announced on Thursday that a subscription option supported by ads will launch in November across a dozen countries to restart its stagnant growth. Even though its share price increased slightly in response to the news about the ad-tier, Netflix reported a loss of 970,000 subscribers in the second quarter and stagnant profits.
According to Netflix Chief Operating Officer Greg Peters, the new "Basic with Ads" subscriptions will cost $6.99 in the US, which is three dollars less than the basic option without ads. We really are at a turning point in the entertainment industry's evolution, so the timing is excellent, according to Peters.
"Now streaming has surpassed both broadcast and cable for total TV time in the United States."
The ad-discounted tier, a first for Netflix, will roll out in Australia, Brazil, Britain, Canada, France, Germany, Italy, Japan, South Korea, Mexico, Spain and the United States.
Video ads will be 15 to 30 seconds long.
Peters said, "We are looking at a very light ad load with no more than four to five minutes of ads per hour, and including some very tight frequency caps so that members don't see the same ad repeatedly."
Since the launch of its streaming service, Netflix has avoided advertising; however, as market competition heats up and consumers become more wary of inflationary increases, they have given in.
Netflix and Disney anticipate that the introduction of less expensive, ad-supported subscriptions will reduce the revenue of conventional television channels.
Disney, a competitor of Netflix, is anticipated to introduce its own ad-supported subscription soon.