After gaining millions of viewers from TV channels, Netflix intends to please its precious advertisers: the streaming giant launches its new subscription with advertising in November in twelve countries, hoping to reignite its breathless growth.
“We firmly believe that a lower consumer price coupled with strong ad monetization will allow us to grow our subscriber base and generate significant incremental revenue over time,” said Greg Peters, chief executive officer of the California group, during a news conference Thursday .
5.99 euros per month
The cheapest subscription costs $6.99 per month in the US (€5.99 in France for the “Essentiel” plan with ads) and includes 15-30 second ads that appear at the beginning and middle of the shows is broadcast.
The basic offers without ads remain at their current price ($9.99 in the US and €8.99 in France). The industry pioneer is cutting the grass under its competitor Disney+, which will launch its own offering with advertising in December for $7.99 per month, while its basic subscription drops to $10.99.
Viewers’ transition from live television to on-demand programming over the Internet “has accelerated to the point where streaming has overtaken traditional channels and cable in the time spent in front of the station in the United States ‘ said Greg Peters. “Netflix’s share of that TV time in the United States is still only 8%, but that’s more than any other channel, which I think is important for advertisers,” he said.
Diving in the stock market
In the first quarter of 2022, Netflix had lost 200,000 subscribers worldwide compared to the end of 2021. The news caused the stock price to plummet by 25%. Then, from March to June, 970,000 subscribers left the platform.
The pioneer of the industry, which has more than 220 million combined subscribers, made two key decisions to reverse the trend. It will tighten the screw on the side of ID and password sharing that will allow many people to access the platform without paying. And he decided to offer a subscription formula with advertising and even speed up its launch after years of refusing this less prestigious solution.
Specifically, the affected users see an average of 4 to 5 minutes of advertising per hour. Your catalog will be reduced by about 15% because Netflix cannot promote certain licensed movies and series. Children’s programs will initially be unaffected by commercials and some newer films will have longer commercials but only run at the very beginning.
The reduced price will “attract consumers,” Insider Intelligence’s Ross Benes said, “but since none of Netflix’s users are currently seeing ads, it will be some time before a large segment of current viewers don’t embrace this formula.”
Advertisers, from auto and luxury brands to tour operators, have responded in droves, according to Netflix advertising director Jeremi Gorman. “We pretty much sold out our inventory for launch,” she said.
In terms of targeting, they can choose the countries and genre (comedy, action, documentary, etc.) and exclude certain features (violence, nudity, etc.), following the dominant model of traditional television.
With the help of its partner Microsoft, Netflix will collect information such as the gender and age of its users and plans so-called behavioral advertising targeting, ie personalized according to people’s preferences, for example on the Internet.
“It’s a win-win for advertisers and our subscribers,” asserted Jeremi Gorman. “For people who choose the formula with ads, it’s important to show them ads that are relevant and appealing to them. Personalization also drives up prices for brands, as finely targeted ads at scale yield better returns.
The company hasn’t disclosed its pricing, but Wall Street Journal sources said in an article in late August that advertisers first have to shell out about $65 to target 1,000 viewers, and then potentially $80 after that, a price considered higher than other streaming platforms.
According to Insider Intelligence, within two years streaming advertising revenue could reach $30 billion in the United States alone, and likely at least double that worldwide. The market is currently being crushed by YouTube.
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