Netflix has made the decision to eliminate its basic, ad-free plan from the options available to new subscribers in the United States and the United Kingdom. This move comes shortly after
Netflix introduced a cheaper, ad-supported option.
On its plans and pricing page, Netflix announced that the basic plan, priced at $9.99 and free from advertisements, is no longer available for new or returning members. However, current subscribers on the basic plan will not be affected unless they choose to switch plans or cancel their subscription.
As a result of this change, Netflix's ad-supported plan, priced at $6.99 per month, now becomes the most affordable option for new subscribers.
During a previous earnings call, Netflix's Chief Financial Officer, Spencer Neumann, emphasized that the ad-supported plan offered better "economics" compared to the basic plan. He stated that the advertising revenue contributed incrementally to both the company's revenue and profit. This shift in strategy reflects Netflix's efforts to boost streaming profits by incorporating advertising into its offerings.
Former Netflix co-CEO, Reed Hastings, admitted last year that he was slow to embrace advertising on the platform due to a focus on digital competition from tech companies. However, the company's current co-CEO, Ted Sarandos, announced plans to explore multiple ad-supported tiers over time.
The standard and premium plans, which do not include ads, will continue to be available at $15.49 and $19.99 per month, respectively.
Netflix introduced the ad-supported plan in response to stagnant subscriber growth and the need to find additional revenue streams. In May, the company reported five million monthly active users for the ad tier, with 25% of new customers opting for the plan where available.
As Netflix prepares to report its earnings, analysts and investors are eager to see how the removal of the basic plan and the ad-supported offering have impacted subscriber additions and revenue. Photo by Fernando Cesar Nox from Jundiaí, Brasil, Wikimedia commons.