Netflix is planning to discontinue its lowest-priced “Basic” plan without ads in Canada and the UK. The streaming giant announced in its latest earnings report for Q4 2023 that its ad-supported plan accounts for 40 percent of all Netflix sign-ups in markets with ads. Now to further increase its revenue, the company intends to retire its Basic plan in some countries and may eventually phase it out completely by Q2 2024.
The Netflix Basic plan used to cost $10 or £7 initially, but the company increased the price to $12 or £8 in October. It also made the Basic plan unavailable for new subscribers since last July. However, now the company is not planning to raise the prices; instead, it is removing its plan altogether for all new and old subscribers, leaving them with only the option to opt for either a pricier ad-free plan (starting from $16.49 or £11 per month) or a cheaper plan with ads ($6 or £5 per month).
“In Q4‘23, like the quarter before, our ads membership increased by nearly 70 percent quarter over quarter, supported by improvements in our offering (e.g., downloads) and the phasing out of our Basic plan for new and rejoining members in our ads markets,” says Netflix in its letter to shareholders.
Netflix’s ad-supported plan has 23 million monthly active users and the company’s main goal for it is to “scale” it up. He explained that this involved making it more appealing with improvements like the ones made last year to the lowest-priced plan, which increased the resolution to 1080p, enabled multiple streams, and allowed downloads, and how Netflix is changing its plans and pricing in other regions.
In its investor’s note, Netflix highlights the three strategies it is adopting to amp up revenue. The three strategies include:
Pricing: Netflix states that it aims to offer a range of price plans to suit different customer needs, with an emphasis on maintaining competitive starting prices. As the company improves and expands its services, it occasionally adjusts its prices to reflect these enhancements.
Ads: Netflix sees the incorporation of ads into its business model as a major source of additional revenue in the medium to long term. Hence, it is planning to phase out the Basic plan in some countries, starting with Canada and the UK in Q2 2024.
Sharing account: Netflix has also adopted a strategy of monetizing sharing. With the restriction, the company states that it has successfully tackled account-sharing issues by introducing features like Transfer Profile and Extra Member.
