New York ( Business) — In 2019, Netflix noted in a letter to its shareholders: “We… are ad-free.” He added that being commercial-free was an “important part of our brand proposition.”
That all changed, however, on Thursday when the platform launched its “Basic with Ads” plan, Netflix’s long-awaited ad-supported subscription option.
The new plan will cost $6.99 a month in the United States, where it is already available. It will also launch in Canada, Australia, Brazil, France, Italy, Germany, Japan, Korea, Mexico, Spain, and the UK at various prices.
The company said “existing plans and members will not be affected.” And, in that sense, he added that “‘Basic with ads’ complements our existing Basic, Standard and Premium plans without ads.”
The new option will offer most of what’s available with the current basic plan of $9.99 per month. However, “Basic with Ads” will include an average of four to five minutes of commercials per hour. Those ads will be 15 or 30 seconds long, and will play before and during TV shows and movies.
While most current subscribers won’t see many changes—unless they take the new plan, of course—this ad-supported launch of Netflix marks one of the most significant moments in its 25-year history.
CEO Reed Hastings caused a stir in Hollywood and Madison Avenue in April when he said the car giant streaming was open to commercial advertisements. For years, Hastings was adamant about not running ads on the platform.
But the company can no longer stick to that strategy. Netflix has had a very difficult year. The platform lost subscribers for the first time in more than a decade and its shares plummeted. Netflix reported last month that it is growing again, but it needs to show investors that it can generate revenue even as subscriber growth has stalled.
“As we have been discussing in recent quarters, improving our pricing strategy is an important near-term focus,” the company wrote last month. He also noted that “the reaction from advertisers so far has been extremely positive.”
In July, Netflix announced that it will partner with Microsoft to improve the sales and technology of the new plan.
“We believe that greater variety, especially for more price-conscious consumers, will translate into significant incremental revenue and operating profit over time,” the company said last month. “That said, it’s still very early days, and since we’re keeping our existing ad-free plans, it will take time for us to build our membership base and associated ad revenue.”
