Netflix Discontinues Its Lowest Ad-Free Subscription Plan Permanently Due to Strong Performance
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Hey there! Let's talk about Netflix shaking things up this year. Say goodbye to the cheap-ish way to stream without ads—the Basic subscription tier. Though Netflix stopped offering the $12 Basic subscription to new or returning subscribers, those holding on to it will have to raise their monthly contribution or switch to the cheaper ad-based tier.
Canada and the U.K. lose their Basic plan in Q2 of 2023, with the possibility of more markets following suit in the coming months, as suggested by Netflix executives in their latest earnings report. The Basic plan saw a $2 price increase towards the end of last year, and those left clinging to it have limited options in terms of price-wise alternatives: the $7 Netflix with ads plan, the $15.49 Standard tier, the $23-a-month Premium tier that supports multiple devices and Ultra HD resolution.
Why the change? Netflix is focusing on their ad business, reporting significant ad-based revenue gains lately. Co-CEO Greg Peters shared the company's intention to improve ad targeting, introduce more "binge ads" (ad-free episodes as a reward), sponsorships, and cater to advertisers' needs. The ad-supported tier already accounts for 40% of all Netflix sign-ups in their ad markets, with the possibility of further price hike in the future, according to executives.
Netflix claims it added 13.1 million subscribers in the last quarter of 2023, reaching around 260 million—a significant growth bump thanks to popular films like Rebel Moon: A Child of Fire and Adam Sandler's Leo. Despite regular price increases, Netflix seems to thrive in the competitive streaming industry, with a lower churn rate compared to other services.
According to data from analysis firm Antenna and displayed by Business Insider, Netflix's churn rate—the ratio of people who cancel versus new or returning subscribers—never went above 2%. Warner Bros. Discovery's Max, on the other hand, peaked at nearly 9% churn in October last year.
Part of Netflix's success could be attributed to its gaming arm, which offers subscribers access to a variety of games for free on top of their subscription, such as Grand Theft Auto remasters. The GTA re-releases were the streaming company's most successful launch to date, with some signing up for Netflix just for Rockstar's original GTA trilogy. The Netflix gaming library boasts other quality titles like Dead Cells and both Oxenfree adventure games. Future plans for games and live sports—including a deal with WWE—intend to offer even more value to subscribers.
On a personal note, I'm not thrilled about this latest "stealth price increase." I'll keep my Basic subscription going for as long as I can, but the inevitable fine print changes, such as no longer being able to stream on my parents' devices and additional price hikes, might not keep me subscribed much longer. I still appreciate great shows on Netflix, like Blue Eye Samurai. What are your thoughts on Netflix's changes?
- In the year 2023, Netflix's decision to discontinue the Basic subscription tier in certain markets, such as Canada and the U.K., might signal a shift towards focusing on their ad-based revenue, as suggested in their earnings report.
- The tech giant is reportedly aiming to improve ad targeting, introduce "binge ads," sponsorships, and cater to advertisers' needs, with the ad-supported tier already accounting for a significant portion of all sign-ups in their ad markets.
- Although the Basic plan saw a price increase towards the end of last year, the cheaper ad-based tier, priced at $7, could become a possible alternative for those unwilling or unable to pay more.
- Despite regular price hikes and the impending disappearance of the Basic plan, Netflix continues to thrive in the competitive streaming industry, boasting a lower churn rate compared to other services, such as Warner Bros. Discovery's Max, according to data from Antenna.
