After trying to avoid it for years, Netflix has launched its subscription tier that comes at a lower cost and includes advertisements.
Key Details
- Thursday, Netflix launched its new subscription tier, “Basic With Ads.” Users can pay a lower monthly fee, but will see ads during the programing.
- The new subscription tier comes at a time when Netflix desperately needs to increase subscriber count and overall revenue.
- With serious competition in the picture, Netflix has been struggling to keep subscribers interested.
- Now, Netflix isn’t just competing for streaming space, it’s also competing with the variety of industries—from grocery stores to hotels—that are entering the advertising space.
Why it’s news
Advertisers have been pulling back on their spending as they wait to see how consumer spending habits will change amid rising costs. Yet, more industries than ever before are competing for advertisers’ attention.
In June, Netflix reported that it had 220.7 million paying subscribers, a decrease of 1.2 million from the beginning of the year. A lower cost subscription tier could entice new customers.
The video streaming company launched the new option in the U.S. and eight other countries on Thursday. The service is a dollar cheaper than competitor Hulu’s lowest priced ad-supported tier.
Netflix will charge $6.99 monthly for the ad-supported service. For every hour of streaming, viewers will have to watch around four to five minutes of advertisements. Most other ad-supported streaming stays around this range.
Netflix’s hurried launch may have been an attempt to get ahead of Disney+ as it plans to launch a similar plan in early December.
Both companies will be competing with Hulu, Peacock from NBCU, Paramount+, and Roku, all while the pool of available advertisers shrinks.
Backing up a bit
Up until last year, Netflix was staunchly opposed to advertising on its platform. Now, it’s charging ahead into the advertising realm.
Netflix has been steadily losing subscribers and is now facing tougher competition from streaming services like Hulu, Disney+, and Apple TV.
Shifting to advertising on the platform could be necessary to create needed revenue for the streaming service.
Netflix’s stock is down nearly 55% this year.