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Netflix's ad-supported plan is finally here

Today's a big day for Netflix as it's now launching its new ad-supported plan, “Basic with Ads,” to subscribers in the U.S., the U.K., France, Germany, Italy, Australia, Japan, Korea and Brazil. The launch comes two days after Netflix rolled out the cheaper tier to its debut markets, Canada and Mexico.

The streamer will now directly compete with other major streaming services that offer ad-supported options, including Hulu, HBO Max, Paramount+ and Peacock, among others.

What is the price tag of Netflix’s Basic with Ads plan?

Image Credits: Netflix

Subscribers in the U.S. can pay $6.99 per month for Netflix’s ad-supported plan. Basic with Ads is $13 less than Netflix’s Premium plan, nearly $9 less than the Standard plan and $3 less than the Basic plan.

The company said it wouldn’t raise the prices of its other tiers like Disney+ will do when it launches its ad plan next month. Netflix rolled out Basic with Ads a month before Disney+ launches its ad-supported plan, which will cost $1 more than Netflix's plan.

How many ads will be in the new plan?

There will be an average of 4 to 5 minutes of ads per hour that play before and during movies and TV shows. Ads will be 15 to 30 seconds long. Fortunately, new Netflix movies only get pre-roll ads, so they won’t be interrupted as often as older movies, which have midroll ads as well as pre-roll.

What are some downsides to the new plan?

Like its ad-free Basic plan, Basic with Ads has a lower video quality of 720p HD and viewers can only stream from one device. Subscribers of the ad-supported tier won’t be able to download content to their devices for offline viewing. Also, the company mentioned that subscribers wouldn’t have access to about 5% to 10% of Netflix’s content catalog due to licensing restrictions.

It remains to be seen how successful the new plan will be for Netflix. It’ll be interesting to learn how many new consumers will subscribe to the cheaper tier and how many subscribers will switch plans to decrease their monthly bill -- even if that means sitting through ads. JP Morgan analyst Doug Anmuth anticipates that Netflix will gain 7.5 million subscribers to its ad-supported tier in 2023 in the U.S. and Canada, driving approximately $600 million in advertising sales.

After two consecutively bad quarters, Netflix has been desperately searching for more revenue and subscribers. In the first and second quarters of this year, Netflix’s global subscriber base declined by 1.2 million. However, the company did experience a win in Q3, adding 2.41 million paid subscribers.

But launching an ad tier alone won’t be the ultimate solution to Netflix’s problems. This is why the company plans to monetize password sharing on the platform in early 2023 with an “extra members” feature that charges a fee to members who want to create subaccounts. The streaming service also launched a profile transfer feature to help account members move over to separate accounts without losing custom settings.