What happens when the person watching your product stops being the only customer you have to please?
Netflix put that question into practice with its advertising plan. On 13 October 2022, it announced Basic with Ads at $6.99 a month in the US, with a launch scheduled for 3 November. The lower price was the obvious headline. I find the second half of the announcement more revealing: the part written for advertisers.
Netflix was selling viewers a cheaper way to watch. It was also selling businesses access to those viewers. That meant the same hour of television had to work for two customers with different priorities.
The viewer wanted entertainment at an acceptable price. The advertiser wanted someone to notice an advert. Every interruption sat between those two interests.
Netflix set out an average of four to five minutes of advertising per hour. Ads would run for 15 or 30 seconds, before and during films and shows. Those details matter because an advertising plan needs a limit the viewer can understand. A vague promise of a few adverts leaves a lot of room for disappointment.
My view: the hard decision here was how much inconvenience the cheaper subscription could carry before it stopped feeling like a good deal. Setting the monthly price was only one part of that decision.
There were other differences in the launch offer. Video quality went up to 720p HD. Subscribers could not download titles. Some films and shows were unavailable because of licensing restrictions, which Netflix said it was working on.
That last restriction is particularly interesting. The customer might see a Netflix subscription and assume it comes with the Netflix catalogue. Yet the company could not simply put adverts around everything it already offered. The rights behind the product affected what could go into the cheaper package.
For any business creating a lower-priced version of an existing service, I would start there. What can you genuinely supply at that price, and which exceptions will customers discover only after paying? A price comparison is much less useful if the buyer cannot see what has been removed.
Netflix said its existing plans and members would not be affected. The new option would sit alongside its ad-free plans. That gave customers a choice rather than imposing advertising on everyone at once. It also left Netflix with a question the announcement could not answer: how many people would join because of the price, and how many existing members would move down to it?
Those are commercially different outcomes. A new subscriber brings a new relationship. Someone switching from a more expensive plan changes the income from a relationship the company already had. Advertising receipts then become part of the calculation, alongside the cost of serving and selling those adverts.
The advertiser side needed its own product work. Netflix promised targeting by country and genre. It also said advertisers could avoid placing ads beside material inconsistent with their brands, such as graphic violence. A large audience alone would not answer where a particular advert might appear.
Measurement was another part of the offer. Netflix announced verification partnerships intended to start in the first quarter of 2023 and US audience measurement through Nielsen planned for sometime that year. These were future commitments in the launch announcement, not completed results.
I would judge the decision using both sides of the service. Are viewers staying after they experience the interruptions? Are advertisers getting enough useful exposure to come back? The announcement did not establish either outcome, and a low entry price cannot answer those questions by itself.
What it does show is how much work hides inside the phrase "cheaper plan". Netflix had to specify the interruptions, catalogue limits and advertiser controls, as well as the price. If I were reviewing a similar proposal, I would ask to see that whole offer before signing off on the headline discount.