When Netflix launched its cheaper ad-supported plan in November 2022, it lacked support for multiple devices. The latest app update adds support for Apple TV.
After updating your Netflix app to version 2.3.0, you should be able to watch Netflix Basic with Ads on Apple TV HD and Apple TV 4K, as highlighted by a German subscriber (websgeisti) on Reddit.
Prior to this update, Netflix's ad-supported plan was not supported on Apple's media player so the Netflix app instead asked you to upgrade to an ad-free plan or use another device.

Netflix Basic with Ads now works on Apple TV. Photo: websgeisti, reddit
Netflix Basic with Ads still doesn't work on PlayStation 3, the Windows app, Chromecast (without Google TV), Android devices running Android 6 or earlier, iPhone/iPads running iOS 14 or earlier, some Blu-ray players, and some set-top-boxes.
Netflix says that there are an average of about 4 minutes of ads per hour in movies and TV shows. Not all titles are available to watch on the ad-supported plan either.
Netflix Basic with Ads is available in Australia, Brazil, Canada, France, Germany, Italy, Japan, Korea, Mexico, Spain, the United Kingdom, and the United States. In the US, it costs $7/month versus $10/month for Netflix Basic (without ads). The company is planning to roll it out to additional countries later.

Illustration: Netflix
- Source: Reddit