Netflix Announces Nov. 3 Launch for Ad-Supported Tier, $7 Price Will Not Provide Competitive Edge

Netflix announced on Oct. 13 that its anticipated ad-supported offering, newly dubbed Basic with Ads, will launch on Nov. 3 in 12 countries: the U.S., the U.K., France, Germany, Italy, Japan, Spain, Brazil, South Korea, Mexico, Australia, and Canada. While pricing will vary by country, the new service tier will be priced below the Basic tier with U.S. pricing at $7 per month with ads and $10 per month without. The new pricing is well below the Standard plan at $15.49 per month and Premium at $20 per month although those tiers offer higher resolutions, a larger library, offline viewing, and more concurrent streams. Given the pricing, we expect many of the ad-supported users in the U.S. will come from subscribers trading down from the more expensive Basic plan. We maintain our $280 fair value estimate as we await more details about the new service and the third-quarter earnings call on Oct. 18.