Streaming giant Netflix (NASDAQ: NFLX) unveiled its upcoming ad-supported subscription tier, coming this November, pricing at $6.99 per month.
The Basic with Ads tier on Netflix shows four or five minutes of advertisements per hour, along with specific Netflix shows - but not the fullest extent of the Netflix catalog. At that subscription price point, Netflix's ad tier costs less than competitor Disney+ (NYSE: DIS) and Hulu's ad-supported packages.
Because Netflix is working through some licensing restrictions, a select amount of its television shows and films will not be made available on its Basic with Ads tier. Each individual advertisement will last anywhere from 15-30 seconds, and take place prior to and after television shows and movies on Netflix.
"We did deals in a timeframe before when we weren't contemplating doing an ad-based tier," Chief Operating Officer Greg Peters said in a statement. "Netflix is still re-doing licensing deals to add rights for advertising. We feel like we've got a very strong offering in terms of the amount of titles."
Netflix also added that it will gather data from users in the future, such as gender or date of birth, so that it can "help us show more relevant ads over time." However, Netflix promises to maintain user privacy and will only utilize the information from users to enhance the advertising experience for users.
Moreover, the Netflix said the ad-supported tier will start using Nielsen's digital audience measurement in the United States in 2023 to give advertisers a better understanding of their reach.
Jon Watts, managing director of the Coalition for Innovative Media Measurement, told CNBC that Netflix's deal with Nielsen suggests that the streaming platform is serious about its investment into the new subscription tier as it join the broader advertising ecosystem.
"It also raises interesting questions about the future evolution of the market, with TV and streaming converging, and learning to co-exist," Watts said.
According to Jeremi Gorman, head of global advertising for Netflix, "inventory is nearly sold-out," while making use of several hundred advertisers. Gorman would not reveal the exact amount that advertisers have paid when asked on a Zoom (NASDAQ: ZM) call with Deadline, but it is known that political advertisements will not be accepted.