In 2019, Netflix said in a letter to shareholders “we … do free advertising”, and added that not advertising is a “deep part of our brand proposition”.
That all changed on Thursday when the streaming leader launched “Basic with Ads”, the platform’s highly anticipated ad-supported subscription plan.
The new tier will cost $6.99 per month in the US, where it’s available now. It is also launching in Canada, Australia, Brazil, France, Italy, Germany, Japan, Korea, Mexico, Spain, and the United Kingdom at various price points.
The company said “current plans and members will not be affected” and that “‘Basic with Ads’ complements our existing Basic, Standard and Premium ad-free plans.”
The new tier will have most of what’s available with Netflix’s current $9.99 per month Basic plan. However, the “Basic with Ads” option will average four to five minutes of ads per hour. These ads will be 15 or 30 seconds long and will run before and during TV shows and movies.
While most current subscribers won’t see much of a change — unless they switch to the new plan, of course — Netflix’s launch with ads is one of the most significant moments in Netflix’s 25-year history. company history.
CEO Reed Hastings sent shockwaves through Hollywood and Madison Avenue in April when he said the streaming giant was open to ads. Hastings had for years been adamant about not putting ads on the platform.
But the company can no longer stick to this strategy. Netflix (NFLX) had a terrible year. The platform lost subscribers for the first time in over a decade and saw its stock plummet. Netflix (NFLX) announced last month that it is returning to growth, but the company needs to show investors that it can generate revenue even if subscriber growth has stalled.
“As we have discussed over the past few quarters, improving our pricing strategy is an important near-term goal,” the company wrote last month, adding that “advertiser reaction so far has been extremely positive.”
In July, Netflix announced that it would partner with Microsoft (MSFT) to improve the sales and technology of the new plan.
“We believe greater choice, especially for more price-conscious consumers, will translate to significantly increased revenue and operating profits over time,” the company said last month. “That said, it’s still very early days, and since we’re keeping our existing plans ad-free, it will take time to grow our membership base and associated ad revenue.”