27 September 2023

Netflix is adding ads: What it means for your subscription

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Lauren Rouse* discusses how the new subscription tier will work.

Netflix is undeniably one of the biggest streaming services in the world, if not the biggest.

But everything reaches a peak at some point, which is what Netflix did in its first quarter, reporting a loss in profits for the first time in over a decade.

What is Netflix’s solution to curb this drop in subscribers? An ad-supported subscription tier.

Is Netflix adding ads?

So what’s the deal with ads on Netflix?

Up until now, the streaming service has made a market off of binge-able content with no commercial breaks or platform ads.

That’s about to change as the streaming giant announced in April it would be introducing a cheaper subscription tier that includes ads.

The company is committed to this idea having recently revealed it has selected Microsoft as its global advertising technology and sales partner.

“It’s very early days and we have much to work through.

“But our long term goal is clear.

“More choice for consumers and a premium, better-than-linear TV brand experience for advertisers.

“We’re excited to work with Microsoft as we bring this new service to life,” Netflix COO Greg Peters said in a statement.

Another caveat of the ad-supported streaming tier is that it will not include all of the shows and movies on the Netflix platform.

This mainly applies to content that the streamer has licensed, not Netflix originals.

Netflix CEO Ted Sarandos said on an earnings call (via Deadline):

“Today, the vast majority of what people watch on Netflix, we can include in the ad-supported tier.

“There’s some things that don’t and we’re in conversations with the studios on, but if we launched the product today, members in the ad-tier would have a great experience.

“We will clear some additional content but certainly not all of it but don’t think it’s a material holdback for the business.”

It’s predicted the tier could be launched on the platform as soon as the beginning of 2023.

Netflix plans to roll it out first in a handful of markets where advertising spend is significant.

How will ads on Netflix work?

To be clear, ads will not be implemented into your Netflix subscription at your current tier level.

Instead, what will happen is Netflix will create a new and cheaper subscription tier to appeal to those who want to pay a lesser price point.

Netflix’s cheapest tier in Australia is currently $10.99 and ranges up to $22.99 a month for the top plan.

This new ad-supported tier will come in cheaper than $10.99.

Still, there’s a lot we don’t know about how the new plan will work.

Will the ads interrupt the content you’re watching or just pop up at the beginning and the end? Will they be seen on the Netflix home screen and around the UI?

There are also issues around consumers’ private data and how that is being used for advertising.

Netflix has a very careful algorithm for promoting its content to viewers, but can that now be used for advertising as well? Time will tell.

The good news is that if you have no desire to change your current Netflix subscription, these ads will not impact you in any way.

We’ll keep you posted as Netflix announces more plans about its new ad-supported subscription tier.

The streaming giant is also cracking down on password sharing in response to its loss in profits, so make sure to warn all the leeches on your account.

*Lauren Rouse is a writer for Lifehacker Australia. She specialises in a range of topics including film and TV, technology, gaming, and life in general.

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