People who curl up on their couches for a bit of Netflix now have a new option — to pay less for their favorite shows, but still watch them with ads.
Netflix has rolled out its Basic with Ads streaming plan in 12 countries — and plans to expand it over time.
It’s a massive shift for the tech giant, which pioneered the world of ad-free, subscription-based streaming.
But when rising costs and offerings from new competitors caused audiences to quit, the company had to act.
In announcing the new service, Netflix said it’s confident there’s now a “price and plan for every fan.”
The new plan will cost £4.99 a month in the UK and $6.99 in the US – about a 30% discount on the company’s cheapest ad-free option.
So will people respond to that?
Kaitlyn, from South West London, told the BBC she had no plans to change.
The 33-year-old said she’s lucky to be able to afford the cost of her subscription and thought Netflix’s move was “a desperate attempt to attract more people” that would hurt the brand.
“When they offer utilities, it feels less like a premium service that people will happily keep paying for,” she said, adding that clogging shows and movies with ads makes Netflix “just another YouTube.” would do.
But streaming audiences are clearly getting restless.
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Netflix’s subscriber base has fallen by more than 1 million in the first half of the year as the company pushed through its latest round of price hikes.
That’s a tiny fraction of its roughly 220 million global accounts, and the company has recouped those losses in the three months through September.
However, a recent global survey by consulting firm Simon Kucher found that more than a third of streaming customers would cancel a subscription within the next 12 months, particularly in markets like China, India and the US.
More than a quarter had already moved to trim one, with concerns over ranking cost as the single biggest driver.
Amid concerns about rising living costs, ads are giving Netflix a chance to retain its audience, said Dominic Sunnebo, global consumer insight director at the Kantar World Panel, which has found that for many UK households, quitting Netflix means stopping streaming altogether.
“Netflix is jumping into ad-supported streaming at exactly the right time, and we expect rapid and significant adoption as consumers struggle to take control of their spending,” he said.
However, analysts at Enders Analysis said they don’t think many of the company’s current viewers would be worth the savings to switch, nor is it likely to attract a large number of new subscribers.
“We find it bizarre that some believe there will be a significant number of Netflix subscribers actively following ad-supported videos in order to save a few pounds a month,” the company wrote in a recent statement.
“This goes against Netflix’s (extremely) effective conditioning of its subscription base, viewing advertising as the ultimate annoyance and expecting nothing less than the cleanest and least intrusive video experience — a strategy that has worked at the expense of every other competitor and laggard service.” “
But while Netflix once excelled at being ad-free, polls by Kantar and others suggest that audience acceptance of ads is growing.
Many of Netflix’s competitors already combine streaming with advertising, or intend to do so. Disney, for example, will launch an ad-supported service in the US in December. This plan starts at $7.99 per month.
Netflix has said that on its ad-supported plan, customers will see an average of four to five minutes of ads per hour.
“I wouldn’t mind watching an ad if it made it cheaper,” students Lottie and Frankie told the BBC.
For now, both 20-year-olds said they don’t directly care about Netflix’s expenses as they look at family accounts.
With Netflix warning of plans to crack down on password sharing, they said the new option could be “good for students.”
However, among non-subscribers, a US survey by DISQO found that only 25% to 35% were interested in subscribing to a service with advertising.
And even if the audience isn’t huge, it could still prove lucrative for Netflix.
After Netflix announced the service, there was a “deluge” of interest from advertisers, although some brands became “more reluctant” when they found out how much the ads would cost, said Liz Duff, head of advertising and operations at Total Media, who buys advertising space for big well-known brands,
Others, on the other hand, are “very interested in participating in the initial launch phase,” she added.
Additional coverage by Charlotte McDonald
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