Netflix Ends Its Most Affordable Ad-Free Plan in the U.S. and U.K.
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Chapter 1: The Shift in Netflix’s Pricing Strategy
Netflix has recently made a significant decision to encourage more subscribers to opt for its ad-supported model or to pay higher fees for its ad-free services. The streaming behemoth has discontinued its $9.99 monthly Basic plan for both new and returning customers in the U.S. and U.K., now offering only three choices: a $6.99 monthly plan with ads, a $15.49 Standard plan without ads, and a $19.99 Premium plan, also ad-free.
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Section 1.1: Understanding the Basic Plan’s Role
The Basic plan provided HD streaming on a single device and served as a midpoint between Netflix's pricier ad-free tiers and its more economical ad-supported option, which offers most of the streaming library but requires viewers to watch ads intermittently. Current Basic plan subscribers can maintain their subscription until they decide to change or cancel their plans, as stated in Netflix’s FAQ.
Netflix representative Kumiko Hidaka confirmed to Business Insider that the service's introductory prices of $6.99 in the U.S. and £4.99 in the U.K. are competitive and offer substantial value considering the extensive and high-quality content available. This change appears to be part of Netflix's plan to enhance the appeal of its ad-supported tier and increase ad revenue amid intensifying competition from other streaming platforms like Apple TV+ and Disney+.
Section 1.2: The Impact of the Ad-Supported Tier
Netflix introduced its ad tier late last year, garnering five million monthly active users by May, as reported by The Hollywood Reporter. The company noted that 25% of new subscribers chose this plan where available. Netflix's Chief Financial Officer, Spencer Neumann, indicated during the last earnings call that the financial benefits of the ad-supported plan surpass those of the Basic plan, and even exceed those of the Standard plan.
Chapter 2: A Strategic Move in a Competitive Landscape
The withdrawal of the Basic plan in the U.S. and U.K. follows the previous removal of the same plan in Canada just a month prior. This change also coincides with Netflix's new password-sharing policy, which limits the number of devices that can stream simultaneously based on the chosen plan.
Former Netflix co-CEO Reed Hastings acknowledged last year that he had been slow to adopt advertising on the platform due to a focus on digital competition from tech companies. Subsequently, co-CEO Ted Sarandos mentioned that Netflix is likely to introduce multiple ad-supported tiers over time.
Netflix is expected to announce its earnings later today, so further details about this decision should emerge soon. Emma Roth, a news writer for The Verge, pointed out: "The basic plan also didn’t allow users to add an extra member to their account as part of its paid sharing policy." This could have influenced Netflix's decision to eliminate the Basic plan, prompting users to either upgrade or share their accounts more broadly.
Netflix’s decision to remove its least expensive ad-free plan may not be well-received by some users seeking a budget-friendly way to enjoy their favorite content without interruptions. However, this strategy may also prove beneficial for Netflix, allowing it to capitalize on its vast content library and loyal audience to enhance revenue and profitability within an increasingly crowded streaming market.