netflix officially launching their cheaper ad supported tier that will
cost you 6 99 a month in the U.
S. And this is all starting today. The
new subscription service will launch in 12 countries and will
be officially called basic with ads, shares of netflix
trading so far today, Not fractional so far today
. So let's bring in Alan Walk co founder and
lead analyst over tv rev. Alan good to have
you here as always. Some are saying this is
really sort of a make or break moment for the
media industry. What do you sort of think about
this? I mean it is sort of a big
deal. I mean netflix launching an ad supported service
and with Disney to follow in the next month is
really going to change the shape of streaming. It's
going to introduce a lot more ad supported to streaming
. And we're just gonna see how much elasticity there
is to the market as well, how many people
were holding out for lower prices, how many people
will shift to ad supported? Yeah. So what
do you sort of think customers need to know about
this ad supported tier? Besides the fact that it's
cheaper and having to sit through commercials, will they
still have access to the same content here at the
end of the day? Are they still gonna also
be seeing the stuff that they get that is outsourced
from other platforms? Like maybe nbcuniversal Sony, all
that other stuff here? Well it's unclear so netflix
has been very you know very assiduously trying to negotiate
deals with a lot of these outside sources, but
you know, they haven't cinched all of them yet
. And it's unclear whether they have rights to show
ads against a lot of these properties. A lot
of the, the shows were not filmed with ad
breaks in them. So if you think about the
way, you know, prime time network tv is
shot, there's always an ad break. You know
, the sort of the storyline goes and they cut
away. Whereas in something movies or shows that were
shot originally for streaming with no ads, there isn't
that natural ad break. And so there's some hesitation
on the part of the companies that own the rights
to that to let ads be shown against it obviously
to that they know they have netflix up against the
wall, so to speak. So there, you
know, the money part is getting tricky. Yeah
, Alan netflix is saying that the service is going
to have about 4 to 5 minutes of ads an
hour. We're seeing competitors Disney plus also following suit
with a new ad supported plan later this year.
I mean look forever. We've sort of analyze this
company based on subscriber numbers. We know that that
number sort of topped out when everybody and their mom
had a netflix subscription. Now they're sort of being
judged on revenue per subscriber now, do you think
that this is going to be the trend we're going
to see from other strippers in the market in terms
of how we gauge success now in the streaming market
. Oh, very, very much. I mean
, I think you're one of the things you also
have to look at too is the time spent on
platforms. So when we're only judging them by the
number of subscribers and just to sort of frame that
Netflix has about 66, penetration in the us and
for comparison mobile phones, cell phones have about 80%
penetration. So there's really not a whole lot of
wiggle room left, but time spent on plan platform
is really important because when you were judging it by
the number of subscribers, they were fine if somebody
just tuned in once a month, once a week
to watch something so long as they kept paying that
, you know that$15 a month. But when
you've got ads against it, you don't see the
ads unless you're watching, it's different than linear tv
, the ad is only served up when someone is
watching it. So in that case you really do
need somebody to be tuning in on a much more
regular basis. So that's a metric. In addition
to revenue that I think we're gonna be seeing a
lot more people looking at this is also a great
day to play for netflix, they're going to get
even more data on their subscribers than they already have
and there's already reports from Madison Avenue that they've sold
basically out on so much of the ad space is
already across the board. I mean, if anything
could, this almost happened to be an accidental,
great thing to happen for netflix in terms of all
of this happening, given the fact that they were
so resistant to having an ad supported tier for so
long. Oh, 100%. I mean, first
off, like it always seemed strange to me that
they never acknowledge that they're going to need ads because
as I've discussed on here before, they are in
every country in the world, except for china,
north, Korea and Syria. Now, in most
of those countries, there really isn't a user base
for a paid subscription service. If you look at
a country like Burkina, faso el Salvador Laos,
where they have a presence and they want to be
the number one streaming service, you know, there's
really not a whole lot of people who can afford
to pay, you know, for a stream for
a ad, free streaming service, so they're always
going to have to introduce and ad supported service,
possibly even quite likely, I would say, actually
a free ad supported service fast in a lot of
these countries. So I think, you know,
by experimenting in the US and learning here, you
know, to your point, they've got a lot
of data. Now, what's interesting though is they
are starting from zero, right? They have no
ad supported subscribers right now. So they're gonna need
to grow that base is very interesting to see where
that base comes from, you, are they going
to cannibalize their ad free subscriber bases, they're gonna
draw new subscribers. Probably my guess would be a
combination of both. Um but you know, if
you're an advertiser, there's a prestige to being on
netflix, that's why they're selling it out. They
also hired some of the top people in the business
to be on their ad sales team. You know
, that's something that people on Madison Avenue talk about
a lot, the quality of their staff there and
so be really interesting to see what they do.
Yeah, the other question will be turned at the
end of the day, does this sort of mitigate
subscribe return of all those people canceling their netflix subscriptions
win a show like Stranger Things is no longer on
because they're paying less than at the end of the
day. The other sort of big question here,
alan is the password sharing crackdown that's going to come
next year. I mean for the longest time you
and I remember this reed Hastings didn't care about this
. They were just happy you were watching netflix,
Is this a smart move for the company? Because
a lot of users are upset because that is something
they've been accustomed to having for so long, multiple
people using the same platform. Well they've done it
in a really smart way. So what they've said
basically is, you know, if you have your
adult Children on the plan, you can keep them
in the same account, you just have to pay
more for them. They can keep all their preferences
, but we're just gonna start charging you a few
more dollars each month if they're, you know,
if it's sort of clear to us that they're not
living with you and they can do that by checking
the I. P. Address where it's coming from
. Um This makes a lot of sense that we've
been talking about this, this notion that you know
, you can keep adult Children on your cell phone
plans on your health insurance once they're out of the
house. So people are just used to it.
I don't think anyone is trying to cheat specifically thinking
oh I'm cheating netflix by doing this. But remember
that a lot of people are 25 or 26 now
got on their parents plan when they were 14 and
just never bothered to get off of it. There
was no real reason. So I think the way
they're handling it is really smart. Um Yeah there's
gonna be situations where a bunch of friends were sharing
an account but I think they, you know,
I think people who were doing that realized like that
that wasn't cool that that was sort of you know
, a hack to the system so we'll see you
and then the big question with that though baker is
what happens with the parents. So do the parents
continue with that$15 a month account Or do the
parents downgrade to an ad supported or even what they
call the basic plan, which I think about$9
a month because it it only allows you one stream
and if the kids have their own accounts anyway,
why do we need five? Why do we need
the ability to do two or three streams at once
? No. Listen, I'm now at the stage
of my life, it's reverse. My parents are
now using my accounts now, which is the even
more bananas part of all of this. Alan,
well, good to have you here as always,
co founder and lead analyst over a T. V 00:07:47.615 --> . Rev.