In November, Netflix will launch an ad-supported streaming plan for $7 per month, in an effort to draw new customers after losing them in the first half of the year.
The $6.99 cost for the “Basic with Ads” plan is $3 less than Netflix’s lowest-priced tier without commercials.
First announced in April by Netflix’s co-CEO, Reed Hastings the advertising stratagy marks significant changes for a company that swore off introducing ads for years, opting instead for “the simplicity of the subscriber model”
Over 10 days, the new option will roll out in 12 countries including:
- Australia
- USA
- Brazil
- Germany
- Japan and Korea
According to Netflix subscribers to the plan will see roughly four to five minutes of advertising per hour and newly released films will have limited advertising to preserve the cinematic experience.
Netflix Chief Operating Officer Greg Peters told reporters licensing restrictions prevent about 5 percent to 10 percent of Netflix’s content from being available on the ad-supported version.
Netflix executives had been fiercely against adding advertisements to their platform for years. In April, the company shocked investors by losing customers in the first quarter and projecting additional losses, when they changed their mind.
Netflix wants to entice new users as well as convince 100 million people who’ve been sharing passwords with family and friends to stop doing so and pay for their own accounts by offering a new, cheaper package.
Programming wont change for existing Netflix customers and those looking for the cheaper tier will have to actively choose it. Mr Peters says the company doesn’t intend to steer users to one tier over another.
“We want to take a pro-consumer approach and let them land on the right plan for them. We think that the revenue model will be fine as a result.” says Mr Peters
Netflix shares were up 5.4 percent at $232.86 in late afternoon trading. The company’s stock had fallen 62 percent this year before the announcement.
As of June, Netflix, which produced huge TV show hits like “Stranger Things” and “Squid Game,” had 216.9 million paying customers, down almost 1.2 million from the beginning of the year.
