Alejandro Arrieche
The video streaming giant Netflix is finally launching its widely-awaited ad-supported subscription package as competition in the space keeps heating up in a turbulent global economy.
According to the company’s official press release, the new package will be called “Basic with Ads” and will cost $6.99 per month. This is $3 less per month compared to Netflix’s basic package and $13 less than what the Premium tier costs per month.
More Details about Basic with Ads from Netflix
The Basic with Ads package will be initially available in 12 countries only including the United States, the United Kingdom, Australia, Canada, Brazil, and a handful of European countries.
The new tier will be officially launched on 1 November in Canada and Mexico, two days after in most of the other countries, and on 10 November in Spain. Basic with Ads will allow users to watch movies and TV shows on up to 1 compatible device at a time.
Also read: How Netflix is Getting Very Serious About Being a Gaming Platform
All the content will be available in high-definition (720p), same as with the Basic package. Ultra HD will not be available for this tier. Meanwhile, the content library that will be accessible for Basic with Ads users will be limited while users will enjoy unlimited access to mobile games.
According to the subscription’s product page, users will have to endure roughly 4 minutes of ads per every 1 hour of content they stream. They cannot be fast-forwarded or skipped. The ads will typically last from 15 to 30 minutes and will play during or before the stream. The platform’s mobile games will remain ad-free for now.
“In short, Basic with Ads is everything people love about Netflix, at a lower price, with a few ads in-between”, the company commented.
Microsoft (MSFT) will be assisting Netflix with the sale of these adverts. This is a little-known service offered by the company founded by Bill Gates and it is powered by a smart platform that allows advertisers to rapidly set up campaigns based on their goals, the regions the audiences they would like to reach, and how much they are planning to spend.
Lowering Prices is the Latest Strategy to Attract Reluctant Users
Netflix’s pivot to a TV-like format is a risky bet but one that the firm appears to be willing to take as competitors keep gaining ground in the streaming war. Cord-cutting seems to be going well in the United States as the share of households that no longer have a cable TV subscription has risen from 18.8% in 2014 to a projected 55% by the end of 2022, data from Statista indicates.
This elevated percentage poses a challenge for Netflix (NFLX) as enticing the remaining percentage of users who are still plugged demanded a study of what is it that attracts them to the offering of traditional cable companies.
The price of the service appears to have been one factor that discouraged households to cut the cord as streaming companies are still operating independently and have not reached agreements to bundle up their services.
This means that a single user must have four or more subscriptions to be able to enjoy the content from today’s top streaming platforms including Disney+, HBO Max, and Prime Video. The total cost of subscribing to all of these services is typically significantly higher than the price paid for a legacy cable subscription.
To overcome this hurdle, Netflix is aiming to attract a portion of those who are on the fence by lowering the price of its service.
Moreover, income from advertising will come to strengthen Netflix’s revenue base. Ideally, the amount the company brings in through this effort should produce the remaining $3 per month that is trimming off the price or, best-case scenario, it could surpass that amount.
Disney+, a fast-growing competitor of the company founded by Reed Hastings, is expected to launch an ad-supported tier by the end of the year as well while Discovery – the owner of HBO – is also contemplating the launch of a subscription package.
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This article was written for Business 2 Community by Alejandro Arrieche.
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