Netflix Drops Cheapest Ad-Free Plan
By Movieguide® Contributor
While reporting another quarter of shocking growth in its ad-supported subscription tier, Netflix revealed it is preparing to cut its most basic ad-free plan and fully commit to its new business model.
Netflix’s ad-tier subscription has been rolled out in major markets for roughly half a year, and after two quarterly reports revealing intense growth, it is clear that this model will be the future of the industry.
Earlier this week, Netflix released its 2023 Q4 report, showing that the ad tier accounted for 40% of new subscriber signups – up from the already high 30% during Q3. This resulted in a roughly 70% growth in ad-tier subscribers during the last three months of the year.
With the release of these impressive numbers, the company explained that it plans to discontinue its most basic ad-free plan, requiring legacy users to upgrade to a premium ad-free subscription or opt into the cheaper ad-supported tier. The company already quietly removed the option for new users to sign up for the basic plan at the end of 2023.
The Verge reported, “That leaves subscribers with Netflix’s $15.49 per month option as Netflix’s cheapest ad-free plan. Going from $11.99 to $15.49 per month is a pretty big jump.”
The company also signaled users will likely see at least one price increase across all subscription levels during 2024.
Given the impressive rate at which users have signed up for the ad-supported tier, it is no surprise that the company is now diving head-first into that business model. With little user guidance towards the ad tier – apart from a password-sharing crackdown – the company still believes its business with ads is only in its infancy and still has remarkable room to grow.
While switching to an ad-supported business model has proven extremely lucrative for Netflix, it is also positive for viewers as it incentivizes the platform to create more engaging content. Netflix now generates more revenue with more watch time, resulting in a tangible reward for its popular shows.
This has already made the company more experimental as it taps into new ideas to drive engagement. The platform has tinkered with livestreaming events over the past year and, earlier this month, announced a 10-year deal with WWE’s RAW programming to begin livestreaming its events in 2025. The ad-supported tier has also opened the company up to subscription bundles, which had previously been economically impossible.
Movieguide® previously reported:
While the price for streaming services has ballooned in recent years, consumers may soon find reprieve through subscription bundles that heavily discount costs.
Verizon recently launched a subscription bundle for the ad-tier version of Netflix and Max priced at $10 per month, discounting $7 per month from the non-bundled price of each service. This deal is groundbreaking, as Netflix has long shied away from offering any discount on its standard pricing.
As streaming services have added ad-free and ad-supported subscription tiers, discounts like this are possible and open the door to similar deals in the future. Through the ad-tier level, Netflix makes more money the more people use the site rather than receiving a flat payment regardless of a user’s watch time.
Netflix executives say the basic ad tier makes the company more money per customer than its base ad-free tier.
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