Netflix, Inc. NFLX is soon set to offer an ad-supported model as part of its initiatives to stage a turnaround.
What Happened: The streaming giant is likely to price the ad-supported subscription at $7-$9 per month, Bloomberg reported. This compares to the $15.49/month it currently charges for the standard plan and $19.99/month for the premium option. Both the latter options come without any commercials.
Netflix is planning to serve up far less than its rivals and is considering four minutes of ads per hour both before and during some programs and not after programs, the report said. The company has reportedly told advertisers that it is looking at smaller deals to start with so that it doesn’t overpromise and overwhelm viewers with the spots.
Bloomberg also said Netflix will launch the ad-supported tier in at least six markets in the fourth quarter and target a broader rollout early next year.
See also: Why This Netflix Analyst Sees ‘More Questions Than Answers’ In Q2 Results
The company isn’t likely to show ads in kids’ programming and also during its original movies, but would plug in ads in many of its own TV shows, the report said.
The new cheaper subscription plan will likely help the company rake in $8.5 billion a year globally by 2027 through subscription fees and ad sales, Ampere Analytics estimates, according to Bloomberg. The plan will attract new price-conscious customers as well as give an option for those who are looking to cancel a pricier plan.
Why It’s Important: Netflix’ fundamentals have been on a downhill slide, especially after the COVID-19-induced strength. The company is facing intensifying competition from rivals, even as it is left to contend with saturation in at least the mature markets it is operating in.
Following a massive loss in net paid subscriber additions in the first quarter, the company identified a few resuscitation measures, including the cheaper ad-supported option and a crackdown on password sharing.
Netflix closed Friday’s session down 4.57% at $223.28, according to Benzinga Pro data.
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