Netflix has announced its decision to phase out its cheapest ad-free subscription tier in several more markets, beginning with Canada and the UK in the second quarter of 2024. The move comes in the wake of the streaming giant’s focus on its ad-supported plan, which has shown significant growth in both revenue and membership.
Summary of Key Points
- Netflix is phasing out its basic ad-free tier in more markets, starting with Canada and the UK in Q2 2024.
- The ad-supported plan has seen a 70% quarterly increase in membership and is generating more revenue per user.
- Netflix is looking to make ads a more substantial revenue stream and may implement additional price hikes in the future.
Netflix has been increasing its subscription prices over the past few years, with the most recent raise in October 2023, bringing the Premium plan price to $23 per month. This was coupled with the company’s termination of the Basic subscription plan and its replacement with an ad-supported tier, as well as a crackdown on password sharing.
The decision to retire the cheapest ad-free tier in markets where the ad-supported plan is available was disclosed during Netflix’s Q4 2023 quarterly earnings call. As a result, the elimination of the basic ad-free tier will leave subscribers with the option to switch to the ad-supported plan or opt for the $15.49 monthly plan, which offers HD streaming on two devices and offline downloads.
The ad-supported plan, priced at $7 per month, has proved to be popular, witnessing a 70% quarterly rise in sign-ups in Q4 2023. It now accounts for 40% of Netflix’s total sign-ups in markets where the plan is available, with 23 million monthly active users as reported by Netflix’s co-CEO, Greg Peters.
Netflix’s aim to strengthen ad revenues has led to improvements in its ad-supported plan, such as an upgrade to 1080p streaming, two simultaneous streams, and offline downloads in October 2023. The company intends to expand the ad-supported plan to further markets in the near future.
Despite these changes, Netflix has not ruled out the possibility of additional price hikes in the future, as outlined in its earnings call. The company believes that such increases will help drive investment and growth in its services.
Frequently Asked Questions
What will happen to existing subscribers of the basic ad-free tier once it is phased out?
Existing subscribers will have the option to switch to the ad-supported plan or pay for the higher-tier ad-free plan priced at $15.49 per month.
What features does the ad-supported plan offer?
The ad-supported plan, priced at $7 per month, provides streaming at up to 1080p resolution, support for two simultaneous streams, and the ability to download content for offline viewing.
Will the ad-supported plan be expanded to more markets?
Yes, Netflix aims to expand the ad-supported plan to additional markets in the coming months as it seeks to strengthen its ad-based revenue stream.
Netflix’s decision to phase out its basic ad-free tier in favor of the ad-supported plan reflects its strategic shift towards maximizing ad-based revenue. The streaming company’s commitment to enhancing its ad-supported offerings, coupled with the potential for future price hikes and further expansion of the ad-supported plan, underscores its focus on driving growth and innovation in the evolving streaming landscape.