Netflix is to drop its low cost Basic tier after it emerged that the Basic with Ads tier had captured 40% of new subscribers in markets where it had launched.
Announcing its Q4 2023 results, the streamer said the number of subscribers on its ad tiers had grown by 70% on the quarter. Netflix didn’t offer a precise subscriber break-out, but has recently said that 23 million were on its ad-supported tiers.
In its shareholder letter, the company confirmed Basic would be retired first in Canada and the UK in the second quarter of 2024. We’re now on a watch to see whether any of Netflix’s competitors follow suit.
Already, the Basic only option has been withdrawn from new customers in the United States, Canada and the UK.
In its earnings interview, co-CEO Greg Peters put the case for the Ad Plan. “[subscribers] get a better plan than Basic, more streams, higher resolution with downloads. And of course, the real benefit is they get access to all these amazing stories at a lower effective price.”
Peters added that the company had “years of work” before its advertising business contributed to the bottom line.
Basic with Ads is available in the United States, UK, Australia, Brazil, Canada, France, Germany, Italy, Japan, Korea, Mexico and Spain.
Netflix added 13.1 million new subscribers on the quarter and picked up revenues of $8.8 billion (€7.9 billion). Netflix ended the year with 260.28 million subscribers, an increase of close to 13% on 2022.
“While the company is working tirelessly to shift key stakeholders’ attention from subscribers to other fundamentals, this key metric always grabs the headlines. These latest results reaffirm that Netflix is definitely the king among all streamers,” wrote PP Foresight’s Paolo Pescatore. “2024 promises to be a pivotal year for its ads business as it starts to ramp up efforts.”
It was the second-best ever quarter for Netflix, which the company attributed to ongoing success in its crackdown on password sharing. “We believe we’ve successfully addressed account sharing, ensuring that when people enjoy Netflix they pay for the service too,” the company wrote in its shareholder letter.
