In a strategic move to attract more subscribers to its ad-supported tier, Netflix has announced the removal of its basic plan in the US and UK. The basic plan, which allowed users to watch shows and movies without commercials, will no longer be available for new or rejoining members. The streaming giant is now emphasizing its $7-per-month option, which includes commercials, launched last November in 12 markets.
The decision to discontinue the $9.99-a-month (about Rs. 820) basic plan comes as Netflix seeks to draw more users to its ad-supported offering. Existing users on the basic plan will be able to continue on it until they decide to change plans or cancel their accounts.
The introduction of the $7-per-month option with commercials was an effort by Netflix to tap into new revenue streams and attract more customers amidst growing competition for online viewership. The company recognized the need to explore alternative pricing models to stay competitive in the ever-evolving streaming landscape.
In May, Netflix made headlines when it cracked down on password sharing among households, leading to the implementation of an additional fee for users sharing accounts outside the same home. This decision had a significant impact on user behavior, prompting a surge in sign-ups for the cheaper ad-supported base tier, which costs $6.99 (about Rs. 574).
Analysts at Macquarie expect Netflix’s crackdown on password sharing to act as a catalyst in driving more users towards the ad-supported tier. As a result, the company is likely to generate higher revenue from advertising with an increased user base opting for the ad-supported option.
In the same month, Netflix reported that its ad-supported tier had reached nearly 5 million active users per month, indicating a positive response from users to the new offering. By emphasizing the breadth of its programming, Netflix aims to attract potential advertisers to capitalize on the growing popularity of its ad-supported tier.
As the streaming giant continues to evolve its business model, it faces ongoing challenges, including the recent Hollywood strike that could impact the company’s second-quarter results. Investors will closely monitor how Netflix navigates through this period of uncertainty and assess potential risks to its growth and profitability.
The move to discontinue the basic ad-free plan in the US and UK demonstrates Netflix’s commitment to exploring different pricing structures and adapting to changing market demands. By focusing on its ad-supported tier, the company seeks to maintain its position as a leading player in the competitive streaming industry while offering users more choices and catering to varying preferences and budgets.
With the streaming landscape continuously evolving and competition intensifying, Netflix’s strategic decisions will play a crucial role in shaping its future trajectory and staying ahead in the highly competitive streaming market. As the company gears up to expand its global reach and cater to diverse audiences, innovation and flexibility will remain key factors in maintaining its strong foothold in the ever-changing digital entertainment space.
