The action represents a change from the official stance taken by Netflix co-CEOs Ted Sarandos and Reed Hastings, who said during the company's earnings call last month that the additional tier wouldn't be implemented until 2023.
But now, according to Variety, Netflix is racing to get it live at the beginning of November in an effort to beat Disney, which is introducing its less expensive, ad-supported tier on December 8.
In response to Variety's reporter's inquiry, Netflix declined to confirm the move and stated that they are "...still in the early days of deciding how to introduce a lower-priced, ad-supported tier and no decisions have been made."
The Wall Street Journal(opens in new tab) reported that Microsoft, which is providing the infrastructure for advertising on Netflix, has asked ad buyers to submit initial bids next week and that they're seeking for huge offers. The current report, however, is consistent with that information.
How long do we chat for?
Netflix is demanding a $65 CPM from potential advertisers as its opening salvo.
Cost per thousand impressions, or CPM, is a marketing word used to describe the price an advertiser pays for every thousand impressions of their advertisements. For instance, if a website publisher charges $2 per CPM, an advertiser will be required to pay $2 for each 1,000 impressions of their advertisement.
Google's average CPM is roughly $2.80, but it appears that Netflix wants to go premium because its $65 CPM is much higher than the $20 industry average for pre-rolled advertisements on streaming services.
In addition, Netflix has requested that agencies commit to spending a minimum of $10 million annually on advertising and that the buys be finalised by the end of September. Netflix officials predict that by the end of 2022, its ad-supported tier will have 500,000 subscribers.
According to reports from the weekend, Netflix appears to be aiming for a monthly fee of $7 to $9 for its ad-supported tier, which includes pre-rolled adverts for movies and four minutes of advertising in every hour of programming for series.
The top 10 most watched TV programmes on Netflix will be available for purchase during the initial launch phase, with The Crown and Dead To Me likely to be among the main targets. However, in the first phase, marketers won't be able to deliver ads based on a territory's geography, thus no promoting a restaurant that's open in Kansas City but not in Seattle. Additionally, they won't be allowed to display advertising based on viewing habits, gender, age, or time of day, but you assume that will all change in due course.
Why is Netflix fighting so hard to defeat Disney?
Things have advanced quickly in terms of acquiring advertisements on Netflix.
When asked about the idea of introducing advertisements on Netflix at the beginning of March, the company's Chief Financial Officer Spencer Neumann was still being very circumspect about the possibility and would only go as far as saying that he could "never say never" and further clarified that the move was "not something in [the brand's] plans right now."
Then, on April 20, Netflix CEO Reed Hastings said during an earnings call that the streaming service was "very open" to the idea of an ad-supported tier.
The company's subsequent earnings call in July included a confirmation of an ad-supported tier, but it made it plain that it wouldn't be available until 2023.
Now that September has arrived, calculations and advancements that ordinarily take years have been accelerated, and by November 1 ads will be available on the platform.
It is clear why Netflix is acting in this way. Executives are confident that this is the best strategy to increase revenue and subscriber growth for the company.
It is less evident why it must surpass Disney. There is obviously a limited amount of advertising funding available, and for successful holiday promotions, the more deals it can secure in advance, the better.
