Netflix is looking at a price point as low as $7 per month for its forthcoming ad-supported streaming plan, set to bow in early 2023, according to a new report — less than half its standard two-stream HD package without advertising, which costs $15.49/month in the U.S.
The streamer is considering pricing the ad plan at $7-$9 per month, with an advertising load of four minutes per hour, Bloomberg reported, citing anonymous sources. An ad-supported version of Disney+ is set to debut in December at $7.99/month, also with four minutes of ads per hour.
Asked to comment, Netflix said the Bloomberg report is “speculation at this point” and that the company hasn’t finalized decisions about pricing or other details for the advertising plan. “We are still in the early days of deciding how to launch a lower priced, ad-supported tier and no decisions have been made,” a spokesperson said.
The Netflix ad plan won’t run ads in kids’ programming or original movies, nor will it allow downloads for offline viewing or the ability to skip through ads, Bloomberg has reported previously, although Netflix has called that purely speculative as well.
In announcing second-quarter 2022 earnings, the company told investors that the ad-supported plan will first be available “in a handful of markets where advertising spend is significant,” presumably including the U.S., in the early part of 2023.
Wall Street analysts believe Netflix’s advertising tier could help it grow its overall subscriber base. COO and chief product officer Greg Peters, on the company’s Q2 earnings interview, said Netflix believes the per-subscriber economics on the ad-supported plan will be the same as — or possibly better than — what it sees with traditional subscribers.
Last month, Netflix announced a pact with Microsoft to serve as its exclusive advertising partner.
Not all content on the no-ads Netflix subscription plans will be available in the advertising version, according to Ted Sarandos, co-CEO and chief content officer. “Some things we’re in conversations with studios on,” Sarandos said in the July 19 earnings interview. “We will clear some additional content. Not all of it. I don’t think it’s a material hold-back to the business.”
Netflix could see ad revenue quickly ramp from $150 million in 2023 to $1.8 billion in 2025, per a recent forecast from Wall Street analyst firm MoffettNathanson. Netflix has the leading share among streaming services in terms of time spent viewing in the U.S., per Nielsen, which “clearly can lead to some high projections of potential advertising revenues,” analyst Michael Nathanson wrote in the June research note. The firm’s model assumes Netflix will initially be able to sell ads on 50% of its content. “However, we believe the company is already striking early deals with media companies and we would expect Netflix should be able to sell advertising against the vast majority (80% estimate) of content on the service by 2025,” Nathanson wrote.
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