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A report released Thursday showed Netflix is now paying back advertisers for failing to meet viewership numbers in its new low-cost subscription option.

The left-leaning streaming service, which saw a dramatic 8.6 percent drop in its share price on Thursday, has been unable to captivate an audience with the low price option called “Basic with Ads” for $6.99 a month.

The service, which launched in the U.S. on November 3rd has 720p video quality, four to five minutes of ads for every hour bars viewers from downloading titles, and restricts access to various movies and tv shows.

The streaming giant failed to catch customers’ eyes with the service and thus has suffered for their shortcomings.

“Netflix is falling short of ad-supported viewership guarantees made to advertisers and allowing advertisers to take their money back for ads that have yet to run, according to five agency executives,” the DigiDay report found. “The specific shortfall amounts vary by advertiser, but in some cases, Netflix has only delivered roughly 80% of the expected audience, said the executives. A Netflix spokesperson declined to comment.”

“’They can’t deliver. They don’t have enough inventory to deliver. So they’re literally giving the money back,’” an agency executive told DigiDay.


Netflix reached an agreement with advertisers in which the companies interested in showcasing their products to viewers would only pay Netflix once viewers were reached. If there was leftover money at the end of a quarter, Netflix was responsible for paying back advertisers the difference.

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“’Pacing was well below expectations, so some advertisers pushed for money back now so we could spend it in the critical holiday time period, and they deserve credit that, in the vain of partnership, [they] have agreed,’” another agency executive told DigiDay.

While some advertisers have pulled their money from the streaming giant, some are hanging on for the first quarter of 2023 because “they believe Netflix’s ad-supported audience will continue to grow and the service will be able to deliver on its guarantees then.”

Netflix did add 2.4 million new subscribers in the third quarter of 2022 which some advertisers are betting will continue into the new year. This is particularly true given that the company is planning on cracking down on password sharing in 2023 to stop multiple people from using the same account, according to CNBC.

The streaming giant has had increasing competition in recent years as it seems like every entertainment company is creating its own streaming platform. While Netflix remains dominant, news of the company having to pay back advertisers is a bad look to potential investors.

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