Netflix to introduce cheaper ad-supported service next month in bid to attract new subscribers

Netflix is set to introduce a cheaper ad-supported subscription tier for customers.

From November 3 UK customers will have access to a new basic tier with adverts at the cost of £4.99 a month.

The streaming giant’s chief operating officer Greg Peters announced the change on Thursday and said it was a “pivotal moment” for the industry.

Adverts will be 15 to 30 second longs and will play before and during series and films, with an average of four to five minutes of adverts per hour.

A limited number of titles, including both TV and film, will be unavailable as a result of licensing restrictions, but the Netflix boss says the company are working to reduce this number.

In the basic tier there will be no ability to download titles with video quality ranging up to 720p/HD.

Customers will still have the ability to personalise their viewing experience and watch content on a range of TV and mobile devices, as per their current plans.

The new tier will first be available in 12 countries – Australia, Brazil, Canada, France, Germany, Italy, Japan, Korea, Mexico, Spain, the UK and the US.

Mr Peters said at the press launch for the new tier: “The timing is great because we really are at this pivotal moment in the entertainment industry and evolution of that industry.

“We’ve seen this gradual switch from linear to on-demand internet-based entertainment, but now that switch is happening at ever-increasing speed, to the point where now streaming has surpassed both broadcast and cable for total TV time in the United States.”

He explained that a similar transition is happening across the world, including the UK, adding: “We at Netflix have a huge opportunity ahead to grow our viewing and to attract more subscribers and part of that is having a wide range of price and plan options for different viewer needs.”

Netflix picked Microsoft to help deliver the commercials in the new tier and pledged to minimise the intrusions into customers’ personal privacy that often accompany digital adverts.

The streamer has said to help advertisers reach the right audience and ensure their adverts are more relevant for consumers, they will offer broad targeting capabilities initially by country and genre.

The streamer has said it will later collect data on gender and age when new customers sign up to help show more relevant adverts over time.

Advertisers will also be able to prevent their adverts from appearing on content that might be inconsistent with their brand – such as titles which feature sex, nudity or graphic violence.

During the press launch for the new tier, Jeremi Gorman, Netflix’s president of worldwide advertising, confirmed: “The privacy of our members is critically important to us and this is why Netflix data is only going to be used to support advertising experiences on Netflix and will not be used to build profiles or ad targeting elsewhere.”

Asked how the streamer plans to ensure the adverts will not disrupt the viewing experience, Mr Peters said Netflix’s internal content tagging teams will be used to find the natural break points within TV shows and films so that they can “deliver the ads in the least obtrusive point”.

In relation with movies, he said there will be a “pre-roll ad experience” for the films recently added to “try and preserve that cinematic model”, while movies that have been on the streamer for a while will have both before and during the movie adverts – but the breaks will be less frequent.

Peters also said that they do not “heavily anchor” their price plans off other streaming giants like Disney+ and Hulu, but instead try to provide a “unique entertainment offering that you can only see on Netflix” and basing their pricing around this.

The streaming giant said it would abandon its resistance to adverts earlier in the year after admitting it had lost subscribers amid stiffer competition and rising inflation that has pressured household budgets, causing management to realise the time has come for a less expensive option.

Earlier this year, the streamer increased the price of its basic and standard plan by £1 a month to £6.99 and £10.99 respectively, while the premium tier will go up by £2 to £15.99.

The company has also started to clamp down on customers sharing their accounts with other households.

Netflix started a crackdown in Chile, Costa Rica and Peru on people sharing passwords and is considering expanding the scheme.