In its earnings report for the fourth quarter of 2023, Netflix said that it added 13.1 million new subscribers, 40 per cent of which belonged to its ad-supported plan.Additionally, the number of subscribers on ad tiers grew by almost 70 per cent quarter-over-quarter. Netflix’s ad-supported offering has 23 million monthly active users, told the co-CEO Greg Peters in an interview for investors.
So, to have more of its customers watch ads, Netflix is retiring the no-ads Basic plan in some of the countries where it has introduced the ad tier. Canada and the UK will be the first countries to see this change in Q2 this year, and then it will be “taking it from there.”
The Basic plan, which was discontinued for new subscribers in 2023, will now be made unavailable for all. Subscribers will have to choose between the $6.99 per month ad-supported Basic plan or the $22.99 per month Premium tier.
Netflix offers ad-supported plans in various countries, including the US, UK, Canada, Australia, France, Germany, Italy, Japan, Korea, Mexico, and Spain. The company launched its Netflix Basic With Ads tier in November 2022, priced at $6.99/month in the US, which is less than half the cost of the Standard plan.
Peter says that Netflix prioritising its expansion by making the plan more attractive with upgrades such as higher resolution, multiple streams, and downloads. Greg told investors that the company is exploring different plans and pricing structures. He further added that the ad-supported plan offers better value than the Basic plan, providing more streams, higher resolution with downloads, and access to all stories at a lower price.
When asked about Amazon’s decision to make ads in Prime Video the default setting starting on January 29th, Peters shared that Netflix had also considered doing the same thing. However, Netflix decided against it and believed that it was better for their members not to force them into a change and give them ads. Instead, they offer an ads plan for those who want it based on the benefits.
According to Peters, Netflix still has a lot of work to do before the advertising business becomes a significant revenue contributor in the 12 markets where it has already launched, including the US. The company’s top priority is to scale up its advertising business. Netflix is continuously working on improving ad targeting and relevance to provide better service to its members.
Netflix plans to increase prices in the future as they invest in and improve their service, which will help drive additional investment to grow their service. “As we invest in and improve Netflix, we’ll occasionally ask our members to pay a little extra to reflect those improvements, which in turn helps drive the positive flywheel of additional investment to further improve and grow our service,” the company said.