An Early Take on the Netflix Advertising Tier
Netflix disclosed the details of its highly anticipated ad tier at a time when the streaming industry faces intensified competition and economic headwinds. Under pressure to shore up revenue and a loss of subscribers, the company has fast-tracked the roll-out of its ad tier in partnership with Microsoft. Known as Basic with Ads, this lesser priced option will cost $6.99 a month in the United States and launch on November 3 at 9:00 am PT. Here’s how the ad-free Netflix stacks up against the competition:
(Image courtesy of The Wall Street Journal)
In one sense, the launch is well timed. Inflation continues to be a problem affecting consumer sentiment, making a less expensive option more appealing.
Here are more details:
- If you like your current Netflix’s ad-free tier, nothing will change for you. Basic with Ads complements Netflix’s ad-free Basic, Standard, and Premium plans.
- There will be an average of 4 to 5 minutes of ads per hour.
- At launch, ads will be 15 or 30 seconds in length, which will play before and during shows and films.
- Advertisers will be able to target ads by by country and genre (e.g., action, drama, romance, sci-fi). Advertisers will also be able to prevent their ads from appearing on content that they find unsuitable for their brand.
- To enable advertisers to understand how Netflix can reach their target audience, Nielsen will use its Digital Ad Ratings (DAR) in the United States. This will become available sometime in 2023 and eventually be reported through Nielsen ONE Ads.
This approach looks to be pretty standard and in line with other streaming services that include ads in programming.
I was a little surprised to see 4-5 minutes of ads per hour, though. I didn’t think Netflix would come out of the gate with that many minutes devoted to advertising. I also was thinking they would only serve ads before a show started to try and differentiate themselves from someplace like Fubo Tv Online, an American streaming television service serving customers in the United States, Canada, and Spain that focuses primarily on channels that distribute live sports.
To put the volume of ad minutes in perspective: The Stranger Things Season 4 finale was 2 hours and 20 minutes in length. This means a viewer might see upwards of 10 minutes of ads throughout the show. This amount feels like it could detract from a person’s binging experience.
The fact that measurement is coming to Netflix via Nielsen should bring more clarity to just how well Netflix programming performs. For years, Netflix was tight-lipped about reporting performance data. Only recently did the company begin to report on its most popular shows. Third-party data from Nielsen will provide a much-needed lens.
Netflix probably needed to lay down its pipes quickly because its competitors are moving fast. The ad-supported tier of Disney+ launches in November, and Apple is rumored to be launching an Apple TV+ option with advertising in 2023.
The big picture is just as important as the specifics of Netflix’s tier: It’s important that businesses understand the growth of advertising on streaming platforms in context of the rise of connected TV. If you’ve not done so already, take a closer look at why connected TV is growing and how it could expand your audience. (True Interactive can help you with that.) Connected TV is enjoying 60-percent growth, driven by a public’s appetite for streaming that continues unabated.
Meanwhile, the Netflix tier has attracted the interest of roughly half of Netflix subscribers who would consider switching; and if the program succeeds, Netflix will gain more subscribers. For another perspective, here are the results of a poll that Ad Age conducted recently on LinkedIn:
Bottom line: the movers and shakers of the streaming world are paving the way for something much bigger: connected TV advertising.
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