Netflix’s New Subscription Tier in Relation to Matching and Selling Ads
Netflix is launching a new subscription tier called “Basic with Ads.” Within this new tier, every hour of content consumed on Netflix will have around four to five minutes of advertisements along with them. It is priced at $6.99 compared to the $9.99 basic plan without advertisements.
The launch of this new ad supported tier relates to matching as there is now a new product on the market available for those who want Netflix at a cheaper price. Those who valued Netflix at $6.99 to $9.98 are now incentivized to get Netflix whereas before they would not buy the basic plan at the price of $9.99. Appealing to this new market and matching their price is why Netflix have chosen to implement this new plan. Those who valued a Netflix subscription for more still have the Basic, Standard, and Premium plans available with more features such as watching on more devices simultaneously and higher definition.
Netflix is able to provide this ad supported plan at a lower price because advertisers are paying for placement. This is where this new subscription tier relates to selling ads and sponsored search. Netflix has not revealed exactly how the ads are chosen, but it can be inferred that it will be similar to other platforms: the ads you receive are based on the content you consume. If certain ads are placed on certain shows and certain shows are more popular/less popular this acts like the slots in the sponsored search unit. Placing ads on the more popular shows would garner more clicks/interaction and would therefore go to advertisers who have a higher price per click. Ad length is also something to consider, longer ads generally garner more clicks/interaction so they also act as slots from the sponsored search unit.
Overall, Netflix implementing a new ad supported plan is smart as it simultaneously appeals to a new market of people who valued Netflix for less and it acquires advertiser payments.
https://www.cnn.com/2022/11/03/media/netflix-with-ads-launch/index.html