Viewers will see four to five minutes of commercials per hour, and some of Netflix's shows will not be available on the tier due to licensing restrictions. Subscribers to Basic With Ads also will not be able to download titles.
After long claiming that being ad-free was one of the qualities that distinguished Netflix, a slowdown in subscriber growth and a plunging stock price convinced the company to change direction.
Analysts expect the new ad tier to help Netflix boost subscribers and generate incremental earnings.
"Basic with Ads is everything people love about Netflix, at a lower price, with a few ads in between," Netflix chief operating officer Greg Peters said.
"Basic with Ads also represents an exciting opportunity for advertisers — the chance to reach a diverse audience, including younger viewers who increasingly don’t watch linear TV, in a premium environment with a seamless, high-resolution ads experience," he added.
Commercials on Basic With Ads will be 15 or 30 seconds in length. They will play before and during shows and films, Netflix said.
"To help advertisers reach the right audience — and ensure our ads are more relevant for consumers — we’ll offer broad targeting capabilities by country and genre (e.g. action, drama, romance, sci-fi)," Peters said. "Advertisers will also be able to prevent their ads from appearing on content that might be inconsistent with their brand (e.g. sex, nudity or graphic violence)."
Netflix said that it would be using Nielsen's Digital Ad Ratings in the U.S. and that data will start to be available in 2023. Those numbers will eventually be reported through Nielsen One Ads, Nielsen's new cross-platform measurement system, it added.
It also said that DoubleVerify and Integral Ad Science will be verifying the viewability and traffic validity of commercials on Netflix starting in the first quarter.
Netflix previously announced that it would be working with Microsoft and its Xandr unit to provide ad tech.
In addition to the U.S., Basic with Ads will be available in Australia, Brazil, Canada, France, Germany, Italy, Japan, Korea, Mexico, Spain and the U.K.
"Our current plans and members will not be impacted," Peters said. "Basic with Ads complements our existing ad-free Basic, Standard and Premium." ■
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Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.