Netflix offers an ads tier subscription over 50% cheaper than its standard subscription. However, there are some hidden costs.
Consumers are looking for ways to save money amid the imminent economic difficulties.
Netflix launched its new tier Basic with Ads in November 2022 after it received consumer opposition to raising its subscription prices.
Ads tier subscriptions cost $6.99 per month, almost 55% less than the Standard subscription.
Consumers pay less monthly, but the newer tiers have hidden costs.
Unpredictable Ad Timing
Users can expect to see 4-5 minutes of advertisements per hour in the new Netflix Basic with Ads Tier.
What is the difference between this and other connected TV subscriptions?
Netflix has a similar amount of ads per hour to other streaming services. However, when an advertisement appears is the problem. Unpredictable ad timings disrupt the user experience.
You will get the same video content as on other streaming services for advertisements. The same problem is present – when this will show up in a user’s Netflix watching experience?
Jay Peters of The Verge says that a user’s ad experience can vary greatly depending on the content they are viewing.
This example shows that the ads need to be placed in the right places. It is possible that Netflix is trying to get the best engagement for advertisers and users.
Notable Titles come with a premium price.
Netflix Basic with Ads is the second tier. It is based on what movies and shows are available at this level.
The Basic tier’s titles seem very scattered, like the unpredictable ads experience.
Users shouldn’t be surprised by the restriction, since Netflix announced it back in July.
Basic users won’t be able to access titles with red padlocks, which means they are restricted.
Users can click on the padlocked title to upgrade their computer.
My theory is that Netflix’s subscription strategy is to attract new subscribers or to get existing subscribers to return at a Basic price level. After falling prices, this can help to grow and scale their subscriber base.
After a user has been logged in, it is possible to restrict titles that users may consider “must-have” items. This will help users see the benefits of upgrading.
How can advertisers forecast connected TV engagement?
Consumers are familiar with connected TV ads. In 2021, brands spent more than $400,000,000 on ads on Hulu.
In times of economic uncertainty, consumers may be willing to watch ads and save money while still enjoying their viewing experience. Consumers may not be as inclined to watch Connected TV ads if their viewing experience declines.
It’s too soon to know about Netflix Basic with ads, but consumers have a common complaint about other streaming services: the need for more variety in advertisements.
Morning Consult was surveyed in 2021 to determine consumers’ thoughts about streaming service ads. The survey revealed that:
- 69% believed that the advertisements they were receiving were repetitive
- This experience was a source of concern for 79% of users
What does this all mean for advertisers?
Marketers could view it as:
- A chance. Too many ads could indicate that there needs to be more competition on Connected TV/OTT. This could mean that brand awareness is more affordable than if the OTT market became saturated.
- Stay away. Streaming services that don’t improve consumers’ viewing experience are less likely to allow them to interact with ads. Consumers may be more likely to churn faster if titles are being relegated at a lower rate. Advertisers will be charged a high cost per engagement due to this. Brands with limited budgets may find this a riskier investment.
Summary
Netflix’s newest price tier allows them to compete with cheaper streaming services. This is an excellent strategic move by Netflix and opens up the OTT market for advertisers to reach users who might not otherwise use streaming services.
Although the plan type is new, Netflix (and advertisers) should closely monitor user engagement and make strategic pivots to maximize subscriber growth and employment.
Although Netflix ads are available to larger advertising companies, I anticipate them to launch an in-house advertising platform like Hulu next year.
Are you familiar with OTT/Connected TV ads? How was your experience? Is it worth the investment?
