Netflix Announces $7 Monthly 720p Ad-Supported Plan With No Downloads

Netflix’s much-anticipated ad-supported plan, dubbed Basic with Ads, will launch in the U.S. Nov. 3 at $6.99 a month, the streaming service said Thursday. Current monthly plans -- $9.99 for Basic, $15.49 for Standard and $19.99 for Premium -- “will not be impacted,” said Greg Peters, chief operating officer-chief product officer.

Basic with Ads has features from Netflix’s Basic plan including “a wide variety of great TV shows and movies,” a personalized viewing experience, availability on “a wide range of TV and mobile devices,” and the ability to change or cancel the plan any time, Netflix said. The ad-supported plan “may not be available through all third-party billing partners and packages,” it said, referring potential subscribers to their provider to confirm availability.

Commercials will be shown “before or during most TV shows and movies” in Basic with Ads, it told prospective customers. “You can expect to see an average of about 4 minutes of ads per hour,” which can vary based on title, Netflix said. “An ad may be as long as 30 seconds," it warned. Users can’t skip or fast-forward ads, but they can pause playback during one, it said.

Ads may be personalized based on users’ interactions with Netflix, such as genres viewed, the company said. Basic with Ads subscribers will be asked at signup for date of birth and gender, and the demographic data will be used, along with general location information based on IP address, “to help tailor the advertising and improve the product offering.”

Subscribers can report a problem with an ad when watching on a computer web browser by moving the mouse or cursor over a flag icon in the top right corner to reveal a menu of options, it said. They can report if an ad is hard to hear, view or understand, “as well if you found it to be inappropriate.”

At launch, ads will be 15 or 30 seconds, Peters said. To help advertisers “reach the right audience” and make sure ads are relevant for subscribers, Netflix will offer “broad targeting capabilities by country and genre,” he said, breaking out action, drama, romance and science fiction. Advertisers will be able to prevent their ads from appearing on content that might be inconsistent with their brand, he said, citing nudity, sex or graphic violence.

Netflix has partnerships with DoubleVerify and Integral Ad Science to verify the viewability and traffic validity of its ads starting in Q1, Peters said. On audience measurement, Peters said Nielsen will use its Digital Ad Ratings in the U.S. when it’s available next year; they will “eventually" be reported through Nielsen One Ads, he said.

Video quality on the new plan tops out at 720p -- vs. Full HD for the Standard plan and Ultra HD for Premium -- and users are limited to watching Netflix on one supported device at a time, the company said. “Some” movies and TV shows will be unavailable under the ad-supported plan due to licensing restrictions. Downloads are not included on the ad-supported plan compared with the ability to download to one, two or four supported devices, respectively, on the ad-free plans. Unlimited access to Netflix games is included across all plans, without ads.

In a questions section on the Netflix website, the company said the $7-a-month plan may not be viewable on “an incompatible device.” It showed Apple TV, Google Chromecast, Facebook Portal, Amazon Fire TV, Nvidia Shield and Roku as compatible media players and streaming sticks. TV logos included Fire TV, Hisense, LG, Panasonic, Philips, Samsung, Sanyo, Sharp, Sony and Vizio. Smart TVs have Netflix “already on them,” and there’s no need to add another device, the company said.

The ad-supported plan will be available Nov. 1 in Canada and Mexico; Nov. 3 in Australia, Brazil, France, Germany, Italy, Japan, Korea, the U.K. and the U.S.; and Nov. 10 in Spain, Netflix said. Shares rose 5.3% Thursday, closing at $232.51.

Cowen analyst John Blackledge called the early November rollout a “clear positive, as it's slightly earlier than we had expected.” The $6.99 price is “favorable,” he said, saying the “low entry point” should be attractive to the millions of U.S. consumers who don’t currently subscribe to Netflix or who share another member’s account.

The initial ad load is “relatively low” vs. linear TV at just four to five minutes per hour, Blackledge said, noting traditional cable TV has about 44 minutes of content per hour, supported by 16 minutes of ads. The entry tier has “significant opportunity” to open up Netflix’s total available market of 700 million broadband households “to more price-sensitive consumers,” he said.