Netflix's 'Basic With Ads' Tier Was the Least Popular Option in Its First Month
Netflix has touted its cheaper ad-based tier as one of the ways it plans to offer more choice for subscribers and strengthen its long-term outlook. So far, data shows users haven’t taken the bait.
As much as Netflix anticipated the launch of its ad-based tier as a means for generating new subscribers on the most popular streaming service, it turns out customers really haven’t been too interested in a cheaper ad-filled service with fewer shows on offer.
Subscription data analytics firm Antenna shared their data with Gizmodo where it noted that just 9% of all new Netflix subscribers opted for the Netflix Basic With Ads Tier last month. The $6.99 a month service launched Nov. 3 in the U.S., but Antenna told the Wall Street Journal over half of those ad-based sign ups were people re-upping their subscription after it lapsed or were joining for the first time. Another 43% were folks deciding to downgrade their subscription from one of the pricier plans. The basic, $9.99 subscription tier remains its most popular at 41%, while the more expensive standard and premium plans actually lost a few points compared to sign-ups in May through October this year.
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You can compare that number to other ad-supported plans in their launch months. HBO Max, which will soon be combined with Discovery+, saw 15% new signups for its HBO Max with Ads service when it launched in 2021. Only .2% of existing HBO Max users made the switch to the cheaper ad tier during its first month, and Antenna estimated that 21% of HBO Max Subscribers are currently using the ad tier.
Of course, that release was a year ago and a world away from the struggles streaming services have suffered throughout 2022. Netflix itself suffered a huge hit earlier this year with 200,000 lost subscribers. The streaming service blamed international complications as well as users sharing passwords for its woes. Though its latest quarterly earnings were promising thanks to a gain of 2.4 million subscribers.
As noted by the Wall Street Journal, streaming services want to emphasize new sign-ups with cheaper tiers while trying to keep current subscribers going on more expensive services. The data shows that, so far, Netflix Basic With Ads hasn’t accomplished everything it’s needed to heading into the new year. Netflix and its execs have been incredibly bullish on its ad-based tier, with co-CEO Ted Sarandos saying the company was considering even more new ad-based subscription tiers.
In an email statement to Gizmodo, a Netflix spokesperson said “There are a number of inaccuracies in this reporting. It’s still very early days for our ad supported tier and we’re pleased with its launch and engagement, as well as the eagerness of advertisers to partner with Netflix.” In an investor conference hosted earlier this month, Sarandos told investors the ad tier was “growing.” He added “advertising for us is crawl, walk, run. We’re definitely crawl right now. We just turned it on, and it works.”
Antenna notes it compiles its figures from third-party transaction data they claim was collected with users’ permission. Antenna counts sign-ups either through the service directly or through other apps such as Google Play Store or through Amazon Fire services.
What’s hurt the ad-tier so far is that not only are users being hit with ads before starting a streaming session, but there are numerous shows and movies that become unavailable once you opt for ads. It excludes several popular Netflix original shows, such as The Last Kingdom, or Peaky Blinders, due to “licensing restrictions,” at least according to Netflix Chief Operating Officer Greg Peters who was quoted by Variety. There’s no word yet if Netflix will ever work out how to give ad tier subscribers a way to watch these shows as well.
Netflix will release its fourth quarter earnings statement Jan. 19 where the company will be expected to answer questions about its newest ad tier.
The ad tier was just half of how Netflix told investors they would right this ship after losses earlier this year. The second part is a plan to crackdown on people sharing their password which the company said could come early in 2023. That move could be bolstered by new guidance reportedly published by the UK’s Intellectual Property Office’s piracy guidance, as first reported by TorrentFreak. The guidance mentioned that those who share passwords for their streaming service accounts are also violating copyright laws, and when TorrentFreak said it reached out to the British government, the guidance was edited to remove reference to password sharing.
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