by Photo: The Canadian Press
Starting Tuesday, Canadian Netflix users will see a new membership option that costs less, but comes with a catch: commercial breaks will be added to their favorite shows.
After years of uninterrupted viewing, the world’s largest streaming service has given its sponsors a word. And with inflation still squeezing consumers, the suggestion of a cheaper Netflix plan might sound appealing to some.
Netflix is not alone in believing that commercial television is back in a big way.
Several free, ad-supported streaming services are launching in Canada in the coming weeks, all based on a business model that leverages the country’s multibillion-dollar advertising industry to fund and acquire programming.
Analysts say the platforms can work together to change the way we watch and pay for TV. A growing number of viewers are complaining that streaming costs have risen close to their old cable bills, forcing every service to rethink their business models.
“Consumers have more choices, more platforms and are making more informed decisions about which streaming services to keep and which to cancel,” says Justin Krieger, senior technology and media analyst at consultancy RSM Canada.
Among the new results, Pluto TV debuted on December 1 with more than 100 channels of free TV series, movies and sports streaming online on a platform that mimics the experience of browsing channels with ads.
Around the same time, CBC will introduce a revamped free-to-air streaming news channel available on CBC Gem and several other streaming platforms. The flagship show hosted by Andrew Chang’s “The National” is the main attraction with commercials interspersed throughout the day.
South of the border, Disney Plus will launch an ad-supported option later this year, and some industry observers predict it will follow the same model in Canada soon after. The advertising level will be introduced at the price of Disney’s current commercial service. Subscribers who want to remove ads will have to pay a fee.
Each service has its own reasons for entering the advertising business.
One of the main drivers for Netflix and Disney is revenue growth as programming costs rise and competitors attract subscribers.
Meanwhile, free streaming services use ad revenue to fund original and licensed programming, putting incredible pressure on Netflix to maintain its leadership position with compelling new movies and shows.
NETFLIX’S PITCH
Earlier this year, after repeatedly vowing to get into advertising, Netflix changed its tune by announcing that it would launch an ad tier for subscribers in key international markets.
In Canada, the basic plan with ads costs $5.99 per month — less than ad-free plans that start at $9.99 and top out at $20.99 per month.
As a trade-off for savings, Netflix says subscribers are shown an average of four to five minutes of ads per hour before and during TV shows and movies.
The video quality on the Netflix ad plan is 720p at the top, leaving full HD streaming at 1080p and 4K for premium subscribers. Viewers also cannot download titles to their devices, and not everything from the service’s library is available.
Those restrictions make it attractive to many Netflix supporters, suggested London, Ont.-based technology analyst Carmi Levy.
He said Canadians were sold on the idea of a commercial-free Netflix a decade ago, prompting other entrants to copy their approach with similar models.
That’s different from the US, where Peacock, Paramount Plus and HBO Max offer cheaper levels of advertising as a subscription option, while Crackle and Amazon’s Freevee are the biggest players on free, ad-supported platforms.
“Canadians don’t have that legacy of experience, and as a result, they may be more resistant to the way Netflix is rolling out the service,” he said.
“It will take time for Netflix and others to educate Canadians about the benefits of paying less for a streaming service and showing ads in return.”
DO CANADIANS WANT ADS?
Kaan Yigit, a technology analyst at Solutions Research Group, said a study his company conducted earlier this year found that U.S. viewers have already adopted ad-supported subscription options.
He said about 40 percent of HBO Max subscribers subscribed to its cheaper ad tier, while an average of 58 percent of subscribers used the cheaper versions of Paramount Plus and Peacock.
He estimates that a modest 20 percent of Canadian Netflix subscribers will join the ad tier in the next 12 to 18 months.
However, Levy suggested that Netflix’s initial sign-up numbers are not the best indicator of the long-term success of the advertising model.
Subscribers who joined the deal can be turned off if the commercial breaks are as long as they are on network TV stations, which typically air 20 minutes of commercials per hour.
“The devil is always in the detail whenever a streaming provider implements an ad-based tier,” Levy said.
“The bottom line is how intrusive ad serving is to the overall viewing experience. And if it’s intrusive in the way consumers have long complained about traditional TV ads, this could very well be the start of Netflix.”
ADVERTISING AGENCIES
Ad agencies say their clients are salivating at the prospect of new investment options in the Canadian market until these twists and turns materialize.
“We’re seeing a lot of initial excitement and questions, especially around Netflix,” said Cossette account director Marissa Cristiano, who says she’s “exploring” the service’s ad buys with some clients.
“They’ve done a really good job of creating … the kind of content that brands really want to be allies with.”
Cherie Hill, director of media at marketing firm Society, Etc., said she expects Netflix ads to target “budget-conscious” shoppers, with a strong focus on consumer goods, household goods and auto companies.
He doesn’t expect much backlash from viewers, mostly because Netflix is making it an opt-in proposition.
“If you choose the ads, it doesn’t leave a negative experience,” he said.
“They offer an alternative and manage expectations.”
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