Executives at Netflix say the company will move forward with plans to eliminate a low-cost, commercial-free tier of service as it pushes more customers to take on a comparable-priced plan with advertising.
During its Q4 2023 earnings call this week, officials at Netflix said it will stop offering the commercial-free plan, called Netflix Basic, to streamers in the United Kingdom and Canada later this spring.
Netflix stopped offering Netflix Basic to new customers in the United States, the U.K. and Canada last summer, while allowing existing customers to continue paying for the plan. The retirement of Netflix Basic completely will mean customers who continued to pay for the plan will be pushed toward Netflix with Ads instead. The cost of Netflix with Ads is a few dollars less than Netflix Basic.
Netflix will continue offering two other plans, called Netflix Standard and Netflix Premium, in those countries. Both tiers offer commercial-free streaming coupled with other perks, including higher-resolution video and the ability to watch content on multiple devices at once.
Netflix introduced its ad-supported tier in November 2022, and its Q4 2023 earnings reflected one full year that the plan was available to streamers in the United States.
Executives said around 40 percent of new subscribers are opting for Netflix with Ads in countries where it is offered. The plan allows Netflix to generate both subscription and advertising revenue from the same customer, which helps lifts its average revenue per user (ARPU).
On Tuesday, Netflix revealed its domestic ARPU rose to $16.64 during Q4 2023, a year-over increase of 4.9 percent and around 2.1 percent higher on a sequential basis. Its domestic subscriber count grew by 2.8 million accounts to end 2023 with 80.1 million customers, or around 30 percent of Netflix’s global accounts. Netflix’s domestic business includes its operations in the U.S. and Canada.
Executives this week said Netflix continues to work with various partners, including Microsoft, to build out its advertising business, and is hiring more sales staff to draw ad buyers to its platform. The company is also introducing new types of advertising, including binge and shoppable advertising experiences.
Netflix is also working to secure more rights to live content, announcing a $5 billion deal to stream TKO Group’s “WWE Raw” on its platform, starting in 2025. The deal, which also includes international distribution of other WWE programs like “Smackdown!” and “WrestleMania,” is expected to lure more advertisers who are willing to buy inventory against linear, appointment-viewing television as opposed to on-demand movies and TV series.