Netflix Inc is considering pricing its new ad-supported tier at $7 to $9 a month, half of its current, most popular plan, which costs $15.49 a month without ads.

The goal is to attract subscribers who are willing to watch ads in exchange for a lower monthly rate. As the streaming TV pioneer prepares to introduce advertising for the first time, it is trying to strike a delicate balance between reaching a more cost-conscious consumer while still offering an enjoyable experience.

According to people familiar with the company’s plans, Netflix plans to sell about four minutes of commercials per hour for the ad-supported service, far less than most peers. The company will run ads before and during some programs, but not after.

It’s also telling advertisers it wants smaller deals up front to avoid overpromising and overwhelming viewers with commercials, said the people, who declined to be named because the discussion is private.

Netflix plans to introduce its new cheaper option in at least half a dozen markets during the last three months of the year. The company said the full rollout may have to wait until early next year.

Details of the service have begun to trickle out as Netflix makes its plans and meets with business partners. A lot can change as the company develops its business.

Netflix has long been marketed as a customer-friendly alternative to cable television. People could watch TV shows and movies on demand and without ads. They can cancel (or sign up) at any time without much hassle and have access to a deep catalog of programs. But the loss of subscribers in the first half of this year forced management to finally take up advertising.

They believe that a cheaper tier will both attract new price-conscious customers and give those who are willing to give up a less expensive alternative.

The new tier could bring Netflix $8.5 billion a year globally by 2027, including subscription fees and ad sales, according to media consultancy Ampere Analytics.

Many cable networks show 10 to 20 minutes of commercials per hour. Most streaming services offer less than cable. Some, like Hulu, frustrate viewers by showing the same ads over and over again.

Netflix hopes to avoid these frequency complaints by starting slowly. It won’t use too much targeting to tailor the ad to the viewer. Most people will see the same ad. And Netflix wants to make sure it doesn’t repeat the same places over and over again.

Much of that work will be done by Microsoft Corp, which won the right to be Netflix’s exclusive ad technology and sales partner. The tech giant has little experience in broadcast television, but has built a $10 billion advertising business over the past few years.

Netflix is ​​in talks with film and TV producers, while Microsoft is talking to a large number of advertising agencies and technology providers. The companies also held joint meetings with some advertising agencies.

Netflix declined to comment on any details of its plans, and many advertisers, partners and investors still have questions. Netflix has not provided projections for how many people it thinks will subscribe to the ad tier, nor has it said when it will begin allowing third parties to measure its viewership.

Netflix is ​​protective of its audience metrics, which it claims are proprietary and give it a competitive advantage. The company could always say those numbers were irrelevant because it didn’t sell advertising.

But advertisers will require Netflix to work with a third-party firm, such as Nielsen, to determine how many people are actually watching.

Netflix is ​​moving to advertising around the same time as Disney+, its biggest competitor. While Disney is raising the price of its basic plan and keeping the current price of its ad-supported version, Netflix is ​​actually lowering the price of its service.

Netflix management has started making decisions about which programs will have ads and which ones won’t. The company won’t run ads in children’s programming, at least not initially. It also won’t include commercials during original movies.

The company would like to include advertising in many of its own TV shows. It also seeks the rights to place ads in those it has a license from partners.

Such studios as Sony, Universal, Warner Bros. and Paramount, are happy to charge Netflix for advertising in old movies or old TV shows that originally aired with ads. They are less willing to allow ads in new apps.

Meanwhile, advertisers are celebrating Netflix’s decision. The rise of ad-free services like Netflix, Amazon Prime Video and Disney+ has created an existential crisis for marketers.

They worried that television, once the largest advertising sector in the world, was being taken over by ad-free services. One agency predicted that by 2025, the amount of time people spend watching video ads will drop by 6%.

Now that Netflix and Disney+ are entering the field, they say it will actually grow by 1%.


Read: Netflix’s ad-supported plan will block downloads for offline viewing

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