TORONTO-
Canadian Netflix users will see a new subscription option starting Tuesday that costs less but comes with a catch: ad breaks inserted into their favorite shows.
After years of uninterrupted binge-watches, the world’s largest streaming service gives way to a word from its sponsors. And as inflation continues to pinch consumers, the offer of a cheaper Netflix package may sound enticing to some.
Netflix isn’t alone in believing that commercial TV is back in full force.
Several free ad-supported streaming services will launch in Canada over the coming weeks, all based on a business model that taps into the country’s multi-billion ad industry to fund and acquire programs.
Analysts say that together the platforms could reshape the way we watch and pay for TV. More viewers are complaining that streaming costs have soared near the level of their old cable bills, causing each service to reconsider its business model.
“Consumers are faced with more choice, more platforms, and are making more deliberate decisions about which streaming services to keep and which to cancel,” said Justin Krieger, senior technology analyst. and media at consulting firm RSM Canada.
Among the newcomers, Pluto TV debuts on December 1 with more than 100 channels of free-to-air TV series, movies and sports streamed “live” online on a platform that mimics the experience of browsing internet. channels, with advertisements.
Around the same time, CBC is launching a new free streaming news channel that will be available on CBC Gem and several other streaming platforms. A flagship program hosted by Andrew Chang of “The National” will be the main attraction with commercials interspersed throughout the day.
South of the border, Disney Plus is rolling out an ad-supported option later this year, with some industry watchers predicting it will roll out the same model in Canada soon after. The ad tier will be introduced at the price of Disney’s existing ad-free service. Subscribers who want to eliminate ads will have to pay a premium.
Each service has its own reasons for getting into the advertising business.
For Netflix and Disney, a key driver is revenue growth as programming costs skyrocket and competitors lure subscribers.
Meanwhile, free streaming services are using ad revenue to fund a slate of original and licensed programming, putting incredible pressure on Netflix to maintain its leadership position with exciting new movies and shows.
NETFLIX PITCH
Earlier this year, after repeatedly vowing never to engage in advertising, Netflix changed its tune by announcing that it would be launching subscriber level advertising in major international markets.
In Canada, the “basic with ads” plan costs $5.99 per month, which is less than the ad-free plans, which start at $9.99 and top out at $20.99 per month.
In return for the savings, Netflix says subscribers will receive an average of four to five minutes of ads per hour that air before and during their TV shows and movies.
Video quality on the Netflix ad plan exceeds 720p, leaving full high-definition streaming at 1080p and 4K for premium subscribers. Viewers also won’t be able to download titles to their devices, and anything in the service’s library won’t be available.
These restrictions will hurt the appeal of many Netflix fans, suggested Carmi Levy, a technology analyst based in London, Ont.
He said Canadians sold the idea of an ad-free Netflix a decade ago, leading other market entrants to emulate their approach with similar models.
This is different from the US where Peacock, Paramount Plus and HBO Max all offer cheaper ad tiers as a subscription option, while Crackle and Amazon’s Freevee are among the top free platforms players. financed by advertising.
“Canadians don’t have that legacy of experience and therefore may be more resistant to how Netflix introduces this service,” he said.
“It will take time for Netflix and others to educate Canadians on the benefits of paying less for a streaming service and getting ads served in return.”
DO CANADIANS WANT ADS?
Kaan Yigit, a technology analyst at Solutions Research Group, said a survey his company conducted earlier this year found that US viewers had already embraced ad-supported subscription options.
About 40% of HBO Max subscribers signed up for its cheaper ad tier, he said, while an average of 58% of subscribers used the cheaper Paramount Plus and Peacock versions.
He estimates that a modest 20% of Canadian Netflix subscribers will join the advertising tier over the next 12 to 18 months.
However, Netflix’s initial sign-up numbers won’t be the best indicator of the ad model’s long-term success, Levy suggested.
Subscribers who have signed up to an agreement could be turned off if commercial breaks become as long as they are on network TV channels, which typically broadcast 20 minutes of commercials per hour.
“The devil is always in the details whenever a streaming provider introduces an ad-based tier,” Levy said.
“What matters most is how intrusive this presentation of advertisements is to the overall viewing experience. well be a non-starter for Netflix.”
ADVERTISING AGENCIES
Until those complexities come to fruition, ad agencies say their clients are salivating at the prospect of new investment options in the Canadian market.
“What we’re seeing is a lot of initial excitement and questions around Netflix, in particular,” said Marissa Cristiano, account manager at Cossette, who says she’s “exploring” ad buying on the service with some customers.
“They’ve done a really good job of creating…the kind of content that brands really want to partner with.”
Cherie Hill, senior vice president of media at marketing firm Society, Etc., said she expects Netflix’s ads to be geared toward “budget-conscious” shoppers, with a heavy emphasis on branded goods. consumer staples, housewares and automakers.
She doesn’t expect much of a return from viewers, mostly because Netflix is making it an opt-in proposition.
“If you choose to have the ads, it won’t leave a negative experience,” she said.
“They provide an option and they manage expectations.”
This report from The Canadian Press was first published on October 30, 2022.
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