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Netflix introduces advertising - that's changing now for subscribers

Anyone who watches their films and series on Netflix, Disney , Prime Video or Apple TV today can hardly imagine what it's like on television: Films that actually run for two hours are 30 minutes longer - because they be interrupted several times by commercials.

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Netflix introduces advertising - that's changing now for subscribers

Anyone who watches their films and series on Netflix, Disney , Prime Video or Apple TV today can hardly imagine what it's like on television: Films that actually run for two hours are 30 minutes longer - because they be interrupted several times by commercials.

The renunciation of this is a recipe for success for streaming services. But now Netflix is ​​turning back time, of all people, the pioneer and world market leader in streaming. From November 3rd there will also be advertising on Netflix, users will then pay EUR 4.99 less than for the previous basic monthly subscription.

However, commercials with a length of 15 or 30 seconds are played before and during the series and films. According to Netflix, it plans four to five minutes of advertising per hour. The image quality is limited to HD quality, so the sharpness is slightly below Full HD quality. Downloads for later offline viewing will also not be possible.

Previously, the basic subscription was only available with the standard resolution. In the future, the image quality will also improve slightly for users with the currently cheapest subscription.

The new ad-supported subscription will be available in 13 countries at launch, namely Australia, Brazil, France, Germany, Italy, Japan, Canada, Korea, Mexico, Spain, the UK and the US.

However, if you want to watch Netflix films and series in better picture quality, on several devices at the same time and also offline, i.e. without an Internet connection, for example on a plane, you have to access the more expensive subscriptions for 12.99 euros or 17.99 euros. Nothing changes here for the users.

For Netflix, the ad-supported subscription is a small revolution. In recent years, the company from Los Gatos in California has countered speculation that it wants to interrupt its films and series. “No ads on Netflix. Point,” CEO Reed Hastings wrote on Facebook back in 2015.

Then last April, he chose completely different words when presenting the balance sheet: "Those who have followed Netflix know that I am against the complexity of advertising and a big fan of the simplicity of subscriptions," he said. "But as much as I'm a fan of that, I'm a bigger fan of consumer choice."

Now users have a choice between expensive without ads and a little less expensive with ads. This is of course not without risk. Because it is questionable whether Netflix will ultimately earn enough money with advertising to compensate for the loss of revenue that occurs when a large number of full subscribers suddenly switch to the cheaper tariff.

According to Netflix, the film and series catalog in the advertising-supported subscription is about five to ten percent smaller than for all other users. "A limited number of films and series will not be available due to licensing reasons," the company's blog post says. "But we are working on it."

Netflix Co-CEO Ted Sarandos made a similar statement when the balance sheet figures were presented recently. It said that for the ad-supported service, Netflix will have the rights to most of the content that users consume on Netflix.

There are reasons why the group is now changing its strategy. The company, spoiled by success, has faltered and has lost subscribers for two quarters in a row, most recently by almost a million.

There are mainly two reasons for this. In many markets, consumers are starting to save because they need to keep their money together. And unlike a few years ago, the competition in the streaming market has grown.

Although Netflix is ​​the market leader with 220 million subscribers worldwide, many other services are fighting for new users in the important home market of the USA, including Disney , Hulu, Paramount , HBO Max, Amazon Prime Video and Apple TV .

Incidentally, this also applies to Germany, where not all of these services are offered, but many of them. And here, too, it is getting tighter and tighter. Paramount has announced its market launch in Germany for December. Netflix and Prime Video are head-to-head in Germany.

Several companies now see growth opportunities with advertising-financed offers. Some of them even waive subscription fees entirely. In Germany, these include, for example, Freevee and Pluto TV.

Freevee is owned by Amazon and emerged from the streaming service IMDb TV. Other services offer a discounted subscription price in exchange for ad breaks, like Netflix is ​​now planning to do. In the US, this applies to Hulu and HBO Max.

Disney is taking a slightly different approach. In the US, users of the standard subscription will be shown advertising clips in the future. If you don't want that, you pay three dollars more for the service, which then gets the addition "Premium". According to unconfirmed reports, Apple is also working on an advertising variant for the Apple TV.

Netflix is ​​venturing into uncharted territory with its new service. That's why the group brought Microsoft on board as a technology and sales partner. Microsoft was able to assert itself against the Google group Alphabet and NBCUniversal (Comcast) in the choice of partner.

Admittedly, Microsoft's advertising business isn't all that big in comparison. However, with the purchase of advertising technology company Xandr from AT

More than ever, Netflix relies on presenting a vision for its growth. The stock has lost almost 60 percent of its value within a year. Officially, Netflix does not give any targets for its ad-supported service.

In mid-September, however, the “Wall Street Journal” (WSJ) reported an internal forecast of around 40 million users by the third quarter of next year. The group shared a corresponding document with media agencies.

In this case, however, users should not be confused with subscribers, because in many households several people share access. Sharing accounts outside of the household has long been a thorn in Netflix's side. But the group has not wanted to take action so far. The company is now testing an additional fee for sharing access in individual countries such as Peru, Costa Rica and Chile.

Advertisers are interested anyway in the number of people who see commercials and not in the number of subscribers. With an ad-supported service, Netflix needs to be more transparent about its viewership than in the past. The group was very cautious here – always on the grounds that it did not have to report this number precisely because it did not show any advertising.

In future, audience numbers will be reported by external and independent bodies for the first time. Netflix accesses the British TV rating agency Broadcasters' Audience Research Board (Barb) and the US market researcher Nielsen. The public will then see for the first time which Netflix productions will be a success and failure. Until now, Netflix had only highlighted the success of its most popular shows.

Apparently, not only does the group have high goals when it comes to viewer numbers, according to a WSJ report, advertising prices are also said to be high. Compared to investors and media agencies in the USA, the group has quoted a price per thousand contacts (CPM) of 80 dollars, which would be at the upper end of the industry. That's the price advertisers pay to reach 1000 Netflix customers.

Advertisers can choose in which country and in which film genre their spots are shown. Netflix says they can also prevent their ads from appearing on content that is inconsistent with their brand, such as sex, nudity, or depictions of violence.

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