Online streaming platform Netflix will charge $6.99 per month for its latest advertising-supported tier, which the company will debut in the U.S on November 3. The company's "Basic with ads" tier will have an average of four to five minutes of commercials each hour and won't provide users the ability to download movies and TV series. A certain number of TV series and movies will not be available in the beginning due to licensing restrictions.
Ads will be 15 or 30 seconds in length and will play before and during Netflix's content. Companies will have the ability to prevent ads from appearing on content they feel unsuitable. To help advertisers understand its reach, ratings company Nielsen will use its standard digital audience measurement, Digital Ad Ratings, in the U.S. starting next year.
Netflix is launching this plan with commercials after rejecting the concept for many years. The company was forced to take this step as its subscribers have come down during the last quarters.
The company's Chief Operating Offer Greg Peters said that it will announce its third quarter earnings after the market closes on Tuesday and plans to unveil subscriber forecasts for the advertising service.
Netflix has tied up with Microsoft for its advertising-supported service. The streaming company will have hundreds of advertisers at launch and has nearly sold out its inventory, the company said in a statement.
The platform said that at first, there will be no advertising within kids programming and new movies. Older films will have mid-roll advertising.
Netflix priced the service so that any customer who switches to the ad-supported service from the ad-free basic plan will have a "neutral to positive" effect on the company's revenue, said Peters.
This works out to Netflix getting at least $3 a month per user in advertising revenue. "We want to offer consumers choice and figure out what the best offering is for them," Peters said during the conference call.
Video resolution for Netflix's advertising tier will be 720p rather than 1080p, the quality of Netflix's standard plan that costs $15.49 per month. The company's basic plan without advertising is $9.99 per month with 720 p resolution.
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