Global streaming giant Netflix is planning to make its new advertising tier available in Australia before the end of the year in a clear sign of its ambitions to boost revenue as subscriber numbers dwindle.
Local media sources, who spoke on the condition of anonymity because they aren’t authorised to speak publicly, said the streaming giant had begun discussions with local advertisers about plans to roll out the ads, which will be unskippable and appear before an episode or film starts.
Netflix is in the midst of its most challenging year on record.Credit:Getty Images
The service is expected to cost about $8, which is less than the price of a basic Netflix streaming subscription. Subscribers paying full price won’t have to view ads. Sources said Netflix is also considering running ads in the middle of a program under the new service.
A Netflix spokesperson said the company was still making decisions on how to launch. “We are still in the early days of deciding how to launch a lower priced, ad-supported option and no decisions have been made. This is all just speculation at this point,” the spokesperson said.
Netflix chief executive Reed Hastings said the streaming giant would begin exploring a cheap, ad-based option in April, after the pandemic darling reported its first drop in users in more than a decade. Plans to bring advertising to its service surprised that market given it was once fiercely opposed to the idea, but local advertising buyers said they expected strong demand.
Local sources said the advertising tier is expected to launch in Australia as early as November, and slots will be available to national clients only. The streaming giant has also decided to reject political, gambling and cryptocurrency advertising and will not market any products to children. It is still considering restrictions on pharmaceuticals, the sources added.
Netflix said in July it would work with Microsoft to launch the new advertising tier, and last Tuesday said it had hired former Snap executives Jeremi Gorman and Peter Naylor to lead the new advertising team. The company has not announced how much it plans to charge customers for the tier, but Bloomberg reported last week it is expected to be between $US7 to $US9 a month. Local sources suggested it will be about half the price of a current basic plan, which is $10.99.
The Wall Street Journal reported last week Netflix was considering charging advertisers roughly $US65 ($95) for reaching 1000 viewers, a measure known as CPM, or cost per thousand. Local sources said Netflix was basing its pricing on projections of how many people are expected to migrate to an advertising model and how many people are using the service locally.
Netflix is not the first streaming service to offer an advertising option. Platforms such as Paramount – which owns Network Ten – and Amazon Prime Video are already using a hybrid model. Disney has also announced plans for ad-supported tier.
In Australia, Netflix competes for eyeballs against about 28 paywalled or advertising-supported streaming services. It has suffered from a loss of content as legacy production studios take content back and launch their own services.
But it is just one of a range of operators in Australia that is trying to change the way it operates to meet consumer demand.
Foxtel, which has tried to offset steady decline in its cable TV offering with three new streaming services, is now turning its attention to the launch of its first smart television, which uses Comcast’s Sky Glass technology.
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