Streaming giant Netflix Inc (NASDAQ:NFLX) rolled out its first ad-supported plan on Thursday. Here are the details on the plan and what it could mean for Netflix stock.
What Happened: On Thursday, Netflix officially introduced its “Basic With Ads” plan in nine countries, including the U.S.
The other countries that have the plan at launch are the United Kingdom, Australia, Japan, Brazil, France, Germany, Italy and South Korea. Pricing varies based on the region.
The ad-supported plan will launch in Canada, Mexico and Spain on Nov. 10.
The new ad-supported plan costs $6.99 per month in the United States, lower than the $9.99 per month and $15.49 per month for the basic and standard plans, respectively.
Netflix calls it “a plan with everything people love about Netflix, at a lower price, with a few ads in-between.”
The streaming company said the new plan will complement its existing ones.
Microsoft Corporation (NASDAQ:MSFT) is the partner for advertising with Netflix on the new plan. Netflix said General Motors, L’Oreal, McDonald’s, LVMH, Subway, Target, Heinz and Carnival Cruises are among the companies that have bought advertising packages.
Netflix will show between four and five minutes of ads per hour to subscribers of the new plan. Some new movies will feature only a pre-roll of ads, while others will see interruptions throughout a full hour of viewing.
Political ads are among those that will not be allowed on Netflix at launch.
A limited number of shows and movies will not be available to Netflix Basic With Ads subscribers.
Related Link: Ad-Supported Plan From Netflix Not Priced Into Stock
Why It’s Important: One of the most important things to note in the launch of “Basic With Ads” from Netflix is the timing. Netflix beat rival Disney+, owned by The Walt Disney Company (NYSE:DIS), with its launch.
Disney+ will launch an ad-supported plan on Dec. 8 in many regions.
Netflix also beats Disney+ and several other platforms on cost. The Netflix ad-supported plan at $6.99 is cheaper than Disney’s new plan, which will come with a price tag of $7.99 per month.
Investors and analyst will be eagerly waiting the next earnings report from Netflix to hear how the launch of the ad-supported plan impacted subscriber counts. Netflix ended the last quarter with 223 million subscribers.
Another big question will be whether Netflix sees an influx of new subscribers for the ad-supported plan or sees existing subscribers trade down for a cheaper plan in the highly competitive streaming market.
Netflix rival Disney+ is launching its new ad-supported plan with a similar price to its existing platform, forcing users to trade up for the ad-free plan and lowering the risk of customers trading down.
NFLX Price Action: Netflix shares were down 1.44% at $269.06 at the close Thursday.
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Photo courtesy of Netflix.
