Netflix has officially launched its US$6.99 lower-priced, ad-supported membership tier across 12 countries. 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.
According to multiple media reports, the streaming giant said it had almost sold out all of the ad inventory at launch, and brands such as Anheuser-Busch InBev , L’Oréal,Louis Vuitton, Tiffany & Co., Bulgari and many others have jumped on board. Video ads will be from 15 seconds to 30 seconds long.
According to a report on The Guardian, in the UK, Netflix is selling its ad slots at about £50 for each 1,000 viewers reached – twice the rate that ITV and Channel 4 charge. Netflix is working with Microsoft as the tech and sales partner for its first ad-supported subscription offering.
Marketers looking to Microsoft for their advertising needs will have access to the Netflix audience and premium connected TV inventory. All ads served on Netflix will be exclusively available through the Microsoft platform. Netflix has also partnered with DoubleVerify and Integral Ad Science to verify the viewability and traffic validity of its ads beginning the first quarter of 2023.
Netflix began mulling ad-supported subscriptions in April this year after years of resisting ads on its platform. Co-CEO Reed Hastings previously said during its earnings call that making a cheaper option available to consumers would "make a lot of sense". As much as he is a fan of the simplicity of subscription, Hastings admitted that he is also a fan of consumer choice.
The shift to ad-supported subscriptions came after Netflix saw a 200,000 dip in subscribers, marking its first decrease in paid subscribers in over a decade. According to CNBC, its shares also dipped more than 25% in extended hours following the earnings report in April.
Tammy Parker, principal analyst at GlobalData also commented that Netflix is sensibly taking a restrained approach to ad slots with an expected average of four to five minutes of ads per hour, and ads will only be 15-30 seconds in length in most markets. However, ads will run during shows and films, which some viewers may find disruptive, especially if they have previously subscribed to Netflix and are used to viewing its content with no advertising.
Nonetheless, as the cost of living continues escalating, budget-conscious consumers seeking a less expensive Netflix tier will gladly accept ads intruding on their viewing experience in exchange for a lower monthly subscription cost.
“Netflix said it has nearly sold out of its initial inventory of ad slots for the global launch, which is not at all surprising given that advertisers are increasingly interested in connected TV services as the TV viewing audience, particularly younger viewers that eschew linear TV, gravitates to streaming services,” she said.
On the content front, well known producers such as Shonda Rhimes, who have multi year contracts with the platform, are unhappy with the streaming site’s decision to include ads in the middle of the content, said a report on CNBC. The report added that sources said Netflix will not be sharing any revenue from advertising with them. While Netflix is certainly not the first to embrace ad supported content, it has used the lack of ads to lure in well-known content creators and market its platform.
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