Ads are coming soon to Netflix
Ads are coming soon to Netflix. What this means for the streaming industry
Ads are coming to Netflix, maybe even sooner than expected.
The Wall Street Journal reported that Netflix has pushed back the launch of its ad-supported subscription tier to November. Meanwhile, the Sydney Morning Herald is reporting that Australia is among the first countries likely to test advertising on Netflix later this year.
Netflix first announced that it would introduce a new, lower-cost, ad-supported subscription tier in April. It was the face of a company that built an ad-free, on-demand television empire. In fact, it was only in 2020 that Netflix CEO Reed Hastings dismissed advertising on the platform, saying “You know, advertising looks easy until you get into it. ”
The change of heart comes after Netflix’s first-quarter 2022 earnings report saw its first subscriber loss in more than a decade. The addition of ads to the platform is a clear sign of the emerging era of experimentation in the streaming landscape.
How will it work?
It’s important to note that not every Netflix subscription tier will contain ads. The current plan is to introduce a newly introduced and cheaper subscription tier supported by advertising, targeting the US market as a price point around $7-9 per month. This will represent a discount from the current cheapest plan of US$9.99 (AUD $10.99) per month. These prices will correspond to the various currency markets in which Netflix operates and the current price points in those markets.
By bringing in a hybrid advertising/subscription tier, Netflix is adapting a business model already in place at other streamers like Hulu. Netflix is keeping it on a hybrid tier, meaning that while the new tier will be cheaper, it won’t be free, as ad-supported streaming is available on Peacock.
Advertising presents complex new technical and business challenges for Netflix, which has not previously operated in this market. In order to enter this new market, Netflix announced that it would serve ads through a partnership with Microsoft.
The partnership with Microsoft alleviated some concerns about Netflix entering a new media market and gave Netflix access to Microsoft’s extensive advertising delivery infrastructure.
Netflix has announced that original movie programming may remain ad-free for a limited period after release, and that original and some licensed children’s content will remain ad-free.
Along with steering clear of children’s advertising, which is highly regulated in Australia by government and industry codes, Netflix is also avoiding ad buyers in cryptocurrencies, political ads, and gambling.
