Netflix (Nasdaq: NFLX) on Thursday announced the rollout of a cheaper ad-supported subscription tier in November, contrary to the brand proposition that the company presented to its shareholders in a 2019 letter.
The new plan, Basic with Ads, will cost $6.99, a dollar cheaper than Hulu’s ad-supported tier, and Disney+’s planned basic with ads rollout in December.
In 2019, the streaming company told its shareholders that they believe that they will have a “more valuable business in the long term by staying out of competing for ad revenue and instead entirely focusing on competing for viewer satisfaction.” But since then, Netflix has seen a drop in subscribers from a boom in competition in the form of Disney+, HBO Max, Hulu, and a few smaller streaming providers.
In the first quarter of the year, Netflix reported losing as many as 200,000 subscribers in what would be the first time in over decade. Meanwhile, Disney+ is growing its subscriber count in the millions, reporting 14.4 million new subscribers in the second quarter.
In May, the company laid off at least 150 employees and dozens of contractors and part-time workers.
“Those who have followed Netflix know that I have been against the complexity of advertising and a big fan of the simplicity of subscription,” Netflix CEO Reed Hastings said in an April earnings call. “But as much as I am a fan of that, I am a bigger fan of consumer choice — and allowing consumers who would like to have a lower price and are advertising tolerant to get what they want makes a lot of sense.”
Basic with Ads
The new plan, much like old-school TV, will have 15-30-second ads before and during shows and films, which will amount to an average of four to five minutes per hour of content. It will also have a shorter list of content due to licensing restrictions, and users will not be able to download content to watch offline, but video quality will be upgraded to HD at 720p for both Basic with Ads and Basic plans (the ad-free Basic plan came with SD quality video at 480p).
The new tier will be rolled out on November 3rd and will be available in 12 countries: Australia, Brazil, Canada, France, Germany, Italy, Japan, Korea, Mexico, Spain, the UK, and the US.
Netflix last traded at $233.20 on the Nasdaq.
Information for this briefing was found via Netflix and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.