Netflix ad-supported inventory ‘nearly sold out’ ahead of November launch

The ad-supported plan will cost subscribers £4.99 per month when it launches in the UK on 3 November

NetflixNetflix already has “hundreds” of advertisers worldwide on board for the launch of its ad-supported tier in November, according to its president of worldwide advertising, Jeremi Gorman.

Speaking on a call with press today (13 October) as Netflix unveiled details of the new tier, Gorman said the streaming giant was “nearly sold out” of all of its inventory at launch.

The ad-supported plan will cost subscribers £4.99 per month when it launches in the UK on 3 November, and show an average of four to five minutes of ads per hour. There will be “tight” frequency caps to prevent members from seeing the same ad repeatedly, chief operating officer Greg Peters said.

Ads will be either 15 or 30 seconds in length, and will be played both before and during the streaming giant’s series and films. To “preserve” the cinematic model, there will be no mid-roll ads on new movies at launch.

Advertisers will be able to target viewers by country and genre, and will later be able to use data provided to Netflix by subscribers at sign-up, including date of birth and gender. According to Gorman, the aim is to offer viewers “more relevant” ads over time.

“If people are going to choose that they want to be in the ad-supported tier, it’s important that we show ads that are relevant to them. That resonate with them,” she said.

Advertisers will also be able to prevent their ads from appearing on content that might be “inconsistent” with their brand, such as sex, nudity or graphic violence.

While Netflix did not disclose its cost per thousands (CPMs), Gorman said it was following a fixed price model at launch rather than an auction model. But this may not be representative of the long-term product, she added.

At launch the new tier will be available in 12 countries, including the UK, the US, Australia, Brazil, Canada, France, Germany, Italy, Japan, Korea, Mexico and Spain. To ensure a “smooth experience”, the tier will rollout first in Canada and Mexico on 1 November, followed by all other countries on 3 November except Spain, which will launch on 10 November.

Netflix has struck partnerships with adtech firms DoubleVerify and Integral Ad Science to verify viewability and traffic validity of ads, starting in the first quarter of 2023.

Netflix: Stranger Things success proves ‘effectiveness’ of marketing strategy

The streaming service will also begin sharing the viewing figures of its shows in the UK for the first time next month, after signing up to independent, industry-owned TV ratings firm Barb. Barb will report Netflix’s audiences every day from 2 November at both a service and programme level, as it already does for more than 300 broadcasters and on-demand services in the UK.

“This is a really exciting opportunity, not only for the Netflix team, but also for our advertisers. This is a chance to reach a diverse, highly engaged audience, including younger viewers, who increasingly aren’t watching linear TV. They can also reach them in a premium environment with a seamless high resolution ads experience. It has been amazing to see the overwhelming interest in our ads,” Gorman said. 

Peters added that entertainment industry is at a “pivotal moment”, due to the “gradual switch” from linear to on-demand internet based entertainment.

According to Barb, Netflix and other SVOD/AVOD services have accounted for around one-sixth of all viewing in 2022 so far. Broadcasters’ linear channels and on-demand services still account for around two-thirds.

Price positioning

Titled Basic with Adverts, the new plan is £2 cheaper than Netflix’s existing Basic plan without ads, and £6 cheaper than its Standard plan. While Disney+ hiked the price of its ad-free plan when it announced its own ad-supported tier earlier this year, Netflix has said there will be no change to its existing plans.

Peters acknowledged the cheaper plan may see existing Netflix subscribers trade down, but said this was part of its “pro-consumer approach”.

“The most important thing for us is that we want to offer consumers choice and for them to figure out what is the best offering for them. And that could mean some of our existing members shift off of a plan... but if that’s the better experience for them in terms of the price and the experience and the offering, we want to enable them to do that,” he said. 

“From our perspective, we’re not trying to steer people to one plan or the other. We really want to take a pro-consumer approach and let them land on on the right plan for them and we think that the revenue model will be fine.”

Disney+ is due to launch its new plan in the US on 8 December, which will cost $7.99 per month – the current cost of an ad-free plan. The same day, there will be a price hike for the ad-free plan, which will cost $10.99 per month.

Discovery+ launched its ad-supported Entertainment Pass and Entertainment & Sports Pass earlier this year, priced at £3.99 per month compared to £6.99.

Peters said Netflix isn’t “heavily going off” its competitor set when setting its pricing, however, and is instead making its calculations around the entertainment value it can deliver members through its exclusive and non-exclusive content.

Other than the ads, the £4.99 tier will be largely the same as the existing Basic plan, except that it will not offer subscribers the option to download titles for offline viewing. A “limited” number of films and TV series won’t be available due to licensing restrictions, but Netflix has said it is “working on” resolving this.

Earlier this year Netflix reported a loss of 1 million subscribers between April and the end of June this year, the second quarter in a row the streaming giant had seen subscribers drop. However, the figure was significantly better than the loss of 2 million subscribers projected in the previous quarter.

Co-CEO Reed Hasting attributed the better than expected result to the success of the Stranger Things series and improvements to Netflix’s marketing strategy.