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Netflix has announced a new price plan for the “advertising model” that it has announced for some time.
The new plan name is “Basic with Ads”. In Japan, it will be available from 1:00 am on Friday, November 4th, and the monthly fee will be 790 yen. It will be 200 yen cheaper than “Basic” (990 yen per month), which was the lowest price in the past.
The aim of the company is to “break away from sluggish membership growth.”
This time, we also got comments from Netflix COO (Chief Operating Officer) and CPO (Chief Product Officer) Greg Peters and other executives. We will analyze the new strategy while overlapping with the comments.
200 yen discount on “Basic” with advertisement
The name of the new plan is “Basic with Ads.” Netflix used to have three pricing plans: Basic, Standard, and Premium.
The difference is mainly in the number of devices that can be viewed at the same time as the image quality. As the name suggests,Basic with ads is “a service content of the basic plan plus the viewing of advertisements, with a 200 yen discount for that amount.”I can say. (see price list in article).
“Basic with advertisement” is 790 yen per month. Except that you can not download it, it conforms to the usage contents of Basic.
Created by: Business Insider Japan
Subscribers themselves apply to switch to Ad-Supported Basic. It doesn’t switch automatically. Also, when joining, it is necessary to enter information such as “email address”, “age”, and “gender”.
Perhaps because of the ads, you can’t “download and watch programs” with the ad-supported Basic. In other words, it will be a plan that cannot be seen in a completely offline environment.
In line with the introduction of Basic with ads, the company’s distribution image quality will be “720p” (1280 x 720 dots), and everything will be “HD or higher”. This also applies to existing basics.
List of plans in the United States. Quality is now “HD” on all plans, and standard definition (SD) is gone.
Advertisement insertion is “TV commercial style”, some past works that can not be seen
The basic functions and provided content are the same as other plans, but for a small number of works whose rights have been processed in the past, “contracts have not been made on the premise that advertisements will be distributed” (Peters COO) Due to the relationship, there are some things that can not be viewed with basic with ads.
Advertisements are in the style of TV commercials, inserted at the start of viewing and during viewing.
CM is 15 seconds to 30 seconds. According to Netflix, that translates to an average of four to five minutes of ads per hour.
In addition, in order to clearly distinguish between the main story and the advertisement, the advertisement may be displayed with a mark such as “AD” to indicate that it is an advertisement.
A sample example of a Netflix ad. The basic ad format looks like this.
Advertisement content is restricted, and “prohibited categories” are established for sensitive content.
“We do not post political/policy-related or illegal advertisements. Anything that violates the law, is fraudulent, discriminatory, has guns, explosives, smoking-related advertisements, or is aimed at getting rich quick. We don’t show things that you might assume (inappropriate), such as things,” Peters, COO.
Streaming competes with TV for viewership ratings
Netflix announced in April that it was considering introducing an advertising model. Since then, the development of advertising plans has progressed rapidly.
“Today, exactly six months after that, we are pleased to announce our new plan.
It was exciting and fun to launch a new plan in such a short time and see the development team in action.
because we are nowWe are at a pivotal time in the entertainment industry and its evolutionBody”
says COO Peters. The reason is illustrated in the following two graphs.
Percentage of viewing time on TV devices in the United States. Internet distribution has already surpassed the broadcasting system.
Here’s a survey of media viewing in living room TV in the US, often cited by Netflix.
Streaming has more time spent on TV than both broadcast and cable, and Netflix has more viewership than any other broadcaster.
The following data is from British audience research company BARB. Although this is not as high as the United States, Netflix’s ratio is over 8%.
Statistics by BARB, UK. Although not as high as in the United States, the market share in the United Kingdom has also increased.
In short,Peters, COO, argues that having that much share “would be important to our advertising partners.”That’s it.
And as a result, being able to offer a somewhat cheaper plan is effective in attracting and retaining users.
Netflix declined to comment directly on how much more subscribers the new plans will bring, or what the rate of “downgrades” from existing plans will be.
The price of “$6.99 per month” in the United States seems to be conscious of the price of Disney ($7.99 each for Hulu and Disney+) that introduces the advertising plan.
Regarding this question,While it said it was “not out of the competitive landscape,” it “judged it according to its own values.”(Peters COO) commented.
The prices in the countries where this plan is introduced are as follows. If you simply calculate with the “dollar yen” rate, it is set at 1 dollar = a little over 113 yen, which seems to be a good deal in recent years when the yen is weak. This is because “price setting is determined by the situation of each country” (COO Peters).
Pricing in 12 countries where advertising plans are offered. Although the price level is similar, Japan is cheaper (calculated at just over 113 yen to the dollar) based on the current exchange rate.
To what extent is viewing data used for targeted advertising?
Of particular concern with the introduction of “ad-supported basic” is the relationship between the advertising model and privacy.
Currently, Netflix stores a large amount of viewing data, which can also be private information for individuals. Some people may be concerned that it will be used for advertising or provided to other companies for the purpose of advertising.
From the conclusion, it seems that a “line” has been laid on that point, and consideration has been given to prevent concerns from arising.
Jeremy Gorman, vice president of advertising at Netflix“No information from people who do not choose an advertising plan will be used for advertising.”Declare.
It also explains how personal information is handled and targeted in the current “ad-supported basic”:
“We plan to collect date of birth and gender at sign-up to help us serve more relevant ads. However, at launch, we will not use this data for ad targeting. Whereas Microsoft, like Partners may only use this information to support Netflix advertising,” Gorman said.
Advertising is basicallyA format in which advertisers select destinations according to content type, such as “content genre” and “whether it is in the top 10 popularity”It is said that
Initially, it will be a “fixed amount” according to the type, etc., but “I would like to introduce an auction format in the future” (Peters COO). However, the timing of the transition is undecided.
In other words, targeting ads are not used in the early stages, but then relatively simple targeting is performed by multiplying age and gender by content type.
“Partners use the data” does not mean that the data is provided to other companies, but to develop and support Netflix’s advertising business.
The system for the advertising business is being developed in partnership with Microsoft.
From the contents of the announcement and comments, it is possible to see the limitation that “complex advertisement distribution cannot be performed at the beginning” because it was developed in a short period of time.
“We’re also preparing to provide something like viewership data to advertisers,” Peters said, which is likely to be an important factor for advertisers as well.
(Written by Sochika Nishida)