Netflix is to broadcast adverts for the first time in the UK from 3 November, as the streaming giant launches a new £4.99 monthly package in an effort to reignite its stalled global growth.
The world’s biggest streaming company, which has this year seen its first quarterly decline in subscribers in more than a decade, will offer a significant reduction to its cheapest existing ad-free package, which is £6.99 a month in the UK.
Netflix, which is launching the ad-supported service called Basic with Ads in 12 countries from 1 November, said a “limited” number of films and TV series would not be available to viewers with the new subscription package due to licensing restrictions with third parties.
But the company hopes to rectify this. “We’re working on [it],” said Greg Peters, Netflix’s chief operating officer.
Peters said only 5% to 10% of Netflix’s overall catalogue would not be currently available to subscribers to the new package.
Viewers will also only be able to stream Netflix on one screen at a time, which is why its £10.99 a month multi-screen package is by far the most popular among the UK’s estimated 13.8 million subscribers. There will also be no ability to download titles.
Peters said it did not matter if some existing Netflix subscribers on higher-priced plans changed to the new budget option, because the combination of a monthly fee plus advertising income will be “neutral to positive” as a result.
“The launch could mean some of our existing members move off [more expensive] plans,” he said. “I definitely believe that a lower consumer-facing price with good incremental ad monetisation will enable us to grow membership and build a really significant incremental revenue and profit stream.”
Netflix’s accelerated launch – the company originally said it intended to unveil its new ad-supported tier next year – means it beats rival Disney+, which is debuting its own package from 8 December in the US.
The decision to introduce ads, which Netflix has been steadfastly against since launching its streaming service in 2007, comes as its growth has all but flatlined at a global base of 221 million subscribers.
The company’s market value has slumped by 65% over the last year, after reporting two consecutive quarters of subscriber decline, and has forecast it will add just 1 million more globally when it reports third-quarter results next week.
“In short, Basic with Ads is everything people love about Netflix, at a lower price, with a few adverts in between,” said Peters. “We now have a price plan for every fan. While it is still early days, we’re pleased with the interest from both consumers and the advertising community.”
Netflix is using Microsoft to handle its advertising with brands able to block their campaigns from appearing around certain content, such as sex, nudity or graphic violence.
The company said it would not accept advertisers from sectors including politics, weapons, smoking and “get rich quick schemes”.
Microsoft is understood to have approached UK media agencies, offering a premium price of £50 for reaching 1,000 viewers, a measure known as CPM.
This is about twice the rate that ITV and Channel 4 charge advertisers on their streaming services, but significantly less than the £70 to £80 charged on traditional broadcast TV channels.
In the UK, some media buyers balked at being asked to make spending commitments upfront on behalf of their clients, based purely on Netflix’s own figures of consumer usage unverified by third-party firms.
“We have been advising clients to go slow on it and see how the numbers pan out before committing,” said a senior executive at one UK media agency. “We can’t make quarterly commitments at this stage.”
Jeremi Gorman, Netflix’s president of worldwide advertising, said the company had sold out of almost all ad inventory for its 12-country launch and had “hundreds of advertisers” signed up.
In an attempt to build industry credibility, this week Netflix made the major move of signing up to Barb, the UK TV audience measurement company, which means that from next month its number of viewers will be independently measured in the same way as broadcasters such as ITV, the BBC, Sky, Channel 4 and Channel 5.
At its launch, Netflix will not provide advertisers with the option of specific demographic targeting, such as the ability to reach the 16- to 34-year-old audiences highly coveted by advertisers, which is standard in traditional broadcast TV.
It is intending to roll out this capability next year, at which point it aims to raise ad prices. Netflix says it will only ask subscribers for their date of birth and gender when they sign up.
In March, Netflix moved to raise prices for subscribers in the UK for the second time in less than 18 months.
