In the coming months, a number of countries are set to bid farewell to Netflix’s Basic subscription tier, signaling the end of an economical route to enjoy Netflix content without ads. The $12 Basic subscription tier, previously discontinued for new subscribers, will soon see existing subscribers facing a choice: either accept a price hike or opt for the more budget-friendly ad-supported tier.
Canada and the U.K. will be the first countries to witness the phasing out of the Basic plan in the second quarter of this year, with additional decisions pending for other markets. While the Basic plan experienced a $2 price increase last year, current Basic subscribers are now left to choose between the $7 Netflix plan with ads, the $15.49 Standard tier, or the premium $23 tier offering enhanced features.
This strategic move is closely tied to Netflix’s advertising business, which has reported substantial revenue gains from ads over recent months, with a 70% increase in ad-based memberships quarter over quarter. Netflix Co-CEO Greg Peters emphasized the company’s commitment to refining ad targeting, introducing more “binge ads,” exploring sponsorships, and meeting advertisers’ needs.
Peters revealed that the ads plan now constitutes 40% of all Netflix sign-ups in their advertising markets. The decision to retire the Basic plan in select advertising countries, starting with Canada and the U.K. in Q2, reflects Netflix’s strategic direction. The company did not rule out potential future price adjustments, indicating a willingness to occasionally ask members to pay extra for service enhancements.
Netflix’s ad-based tier currently boasts 23 million monthly active users, according to Peters. Despite routine price adjustments in recent years, Netflix has maintained a robust subscriber base, reaching around 260 million in the last quarter of 2023. The company’s resilience in a competitive streaming environment is evident in low churn rates, consistently staying below 2% in 2023, compared to other services like Warner Bros. Discovery’s Max, which experienced higher churn rates.
Netflix’s sustained subscriber base could be attributed in part to its gaming arm, a relatively unknown feature that allows subscribers to access various games at no additional cost. Netflix highlighted the success of game releases, such as the remastered Grand Theft Auto trilogy, as their “most successful launch to date.” The company aims to provide more value through games and live sports, recently securing a deal with WWE.
Despite these developments, the removal of the Basic plan represents a subtle price adjustment that could impact long-term subscribers. The introduction of higher subscription tiers, combined with the dynamic landscape of streaming services, may influence user decisions, even with additional features like an expanding game library.