New York CNN store —
In 2019, Netflix said in a letter to shareholders, “We… are ad-free,” adding that ad-free is a “deep part of our brand promise.”
That all changed on Thursday when the streaming leader launched Basic with Ads, the platform’s much-anticipated ad-supported subscription plan.
The new tier costs $6.99 per month in the US, where it’s available now. It will also be launched in Canada, Australia, Brazil, France, Italy, Germany, Japan, Korea, Mexico, Spain and the United Kingdom at various price points.
The company has stated that “current plans and members will not be impacted” and that “‘Basic with Ads’ complements our existing ad-free Basic, Standard and Premium 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 contains an average of four to five minutes of advertising per hour. These ads are 15 or 30 seconds long and play before and during TV series and movies.
While most current subscribers won’t see any major changes — unless they switch to the new plan, of course — Netflix’s commercial launch is one of the most defining moments in the company’s 25-year history.
CEO Reed Hastings sent shockwaves through Hollywood and Madison Avenue in April when he said the streaming giant was open to advertising. Hastings had insisted for years not to advertise 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 more than a decade and its shares plummeted. Netflix (NFLX) reported last month that it was growing again, but the company needs to show investors it can generate revenue even as subscriber growth falters.
“As we’ve discussed over the past few quarters, improving our pricing strategy is a key near-term focus,” the company wrote last month, adding that “reaction from advertisers so far has been extremely positive.”
In July, Netflix announced it would be working with Microsoft (MSFT) to improve sales and technology for the new plan.
“We believe that greater choice, particularly for more budget-conscious consumers, will translate to meaningful incremental revenue and operating profits over time,” the company said last month. “That said, it’s very early days and as we keep our existing plans ad-free, it will take some time to build up our membership base and associated advertising revenue.”