Bloomberg Línea — Netflix (NFLX) announced on Thursday a new version of its streaming service, with a lower price and supported by ads.
The plan with ads will initially work in 12 countries: Brazil, Australia, Canada, France, Germany, Italy, Japan, Korea, Mexico, Spain, the United Kingdom, and the United States.
The new basic plan with advertising will cost 18.90 reais ($3.60) a month in Brazil, 99 pesos ($4.95) in Mexico and $6.99 in the United States, and will launch on November 3 at 1 pm, and in Mexico and Canada on November 1.
Today, the basic plan without ads in Brazil costs 25.90 reais ($4.94), while the standard plan costs 39.90 reais, and the premium 55.90 reais.
According to Netflix, the basic plan with ads will complement the existing ad-free plans.
The company had already announced that it intended to launch the low-cost version later this year, in a strategy to seek new revenue as subscriber growth has stagnated over the past two quarters.
Netflix is also testing charging for password sharing in some Latin American countries.
What are the changes?
The basic plan’s video quality will be 720p/HD and the platform will have four to five minutes of ads per hour, which may be at the beginning or middle of a series or movie.
Netflix said some movies and series will not be available on the plan with ads because of licensing restrictions, but assured that it is “already working on it”.
When the service launches in November, the ads will be 15 or 30 seconds long, shown before and during series and movies.
According to Netflix, the countries that were chosen for the launch of the new plan have to do with the number of streaming hours watched, and because they are seen as a mature advertising market.
Political ads or ads with fraudulent content, or ads for guns or cigarettes, for example, will not be allowed, the company said, adding that it has sold almost all of its ad availability for the launch of the new plan.
For advertisers, Netflix said it will offer features to confirm that advertising was seen by the target audience in the first quarter of next year.
Advertisers will also be able to specify the audience they want their ad to air to, i.e. for sci-fi or drama content, and there is also the option to restrict ads in movies that contain nudity, for example.
In a press conference on Thursday, Greg Peters, Netflix’s COO; said that the launch within six months of the company announcing it would work on a model with ads in April was only possible because of the company’s internal work with its partnership with Microsoft.
According to Peters, streaming has already surpassed cable TV viewing time in the US, and with the new ad-driven plan offering, Netflix hopes to attract new subscribers who want to pay less.
“From a revenue perspective, we’re agnostic about where the revenue will come from [whether from a higher priced subscription or whether from ads],” the COO said, responding to reporters about a possible shift of users to the cheaper version.
“We are confident that new members will subscribe to the service, and we will increase the number of users,” Peters said.
Netflix also announced a partnership with Nielsen to measure advertising data in the US by 2023.
According to Netflix, the platform’s ad data will only be used for Netflix itself.
At launch, ads will not be offered in an auction format, but rather in a fixed-price model.
The version with ads will not allow the download of content to watch offline, “mostly because of the technical complexity,” Peters explained.
“The basic service with ads also represents a great opportunity for advertisers: the chance to reach a diverse audience, including younger people who increasingly don’t watch traditional TV, in a premium environment with an integrated, high-resolution ad experience,” Netflix said in a press release.