Netflix Inc. is considering charging about $7 to $9 a month for its new advertising-supported plan, half of its current most-popular plan, which costs $15.49 monthly with no commercials.
The company plans to launch its budget-friendly option in the year’s final three months across at least half a dozen markets. However, as Bloomberg reported, the full rollout may have to wait until early next year.
The streaming giant plans to sell about four minutes of commercials per hour for the ad-supported service, far less than most of its peers, according to people familiar with the company’s plans.
The company will show advertisements before and during some programs, but not after. It’s also telling advertisers it wants to make smaller deals upfront, so it doesn’t overpromise and overwhelm viewers with the spots, said the people, who declined to be identified because the discussions are private.
Netflix has declined to comment on any specifics about its plans, and many advertisers, partners, and investors still have questions.
Netflix’s goal is to attract subscribers willing to watch some ads in exchange for a lower monthly rate. As the streaming TV pioneer prepares to introduce advertising, it’s trying to strike a careful balance between reaching a more cost-conscious consumer and offering a pleasant experience.
Microsoft Corp. will handle much of that work, which will be Netflix’s exclusive advertising technology and sales partner.
The new plan for ad-supported subscriptions comes after the company reported a loss of about 200,000 subscribers in the first quarter this year against rising inflation squeezing consumer spending.
Netflix is moving into advertising around the same time as Disney+, its biggest rival. While Disney is raising the price on its preliminary plan and keeping the current price for its ad-supported version, Netflix is lowering its service price.
Advertisers, meanwhile, are celebrating Netflix’s decision. The growth of ad-free services like Netflix, Amazon Prime Video, and Disney+ prompted an existential crisis among marketers. They worried that TV, once the most extensive advertising sector in the world, was being taken over by services that didn’t run advertising.
One agency projected that the number of time people spent watching the ad-supported video would decline by 6% by 2025. Now that Netflix and Disney+ are entering the field, they say it will increase by 1%.