Netflix bids farewell to its Basic subscription tier in 2024, impacting countries like Canada and the U.K. Changes are tied to Netflix’s growing ad-based revenue and plans for improved ad targeting.
Netflix Waves Goodbye to Basic Tier
In a significant shift, Netflix is set to phase out its Basic subscription tier in some countries this year, marking the end of an era for users seeking an affordable, ad-free streaming experience. The move is prompted by Netflix’s strategic focus on its ad business, which has reported substantial revenue gains in recent months.
The $12 Basic subscription tier, which had already seen a price increase of $2 last year, will vanish for existing subscribers in Canada and the U.K. during the second quarter of 2024. Netflix executives, speaking in the latest earnings report, hinted at the possibility of extending this change to more markets in subsequent months.
For users with lingering Basic subscriptions, the next available options include the $7 Netflix plan with ads or the $15.49 Standard tier. Additionally, there’s a $23-a-month Premium tier supporting more simultaneous devices and offering Ultra HD resolution.
This strategic shift is explicitly linked to Netflix’s ad business, which has seen a remarkable 70% increase in ad-based membership quarter over quarter. Netflix co-CEO Greg Peters outlined the company’s goals, emphasizing improvements in ad targeting, introducing more “binge ads” that reward viewers with ad-free episodes, sponsorships, and addressing advertisers’ needs.
“The ads plan now accounts for 40% of all Netflix sign-ups in our ads markets, and we’re looking to retire our Basic plan in some of our ads countries, starting with Canada and the UK in Q2 and taking it from there,” stated executives in the investor briefing.
Netflix, boasting 23 million monthly active users for its ad-based tier, envisions continued growth in the advertising space. The company’s decision aligns with its pursuit of sustained revenue streams, and Netflix did not rule out the possibility of future price hikes, citing occasional adjustments for service enhancements.
Despite the looming changes, Netflix’s overall subscriber base remains robust, with the company reporting an addition of 13.1 million subscribers in the last quarter of 2023, bringing the total to around 260 million. Key contributors to this growth include blockbuster films like “Rebel Moon: A Child of Fire” and Adam Sandler’s “Leo.”
In the competitive streaming landscape, Netflix has maintained a relatively low churn rate—below 2% throughout 2023—compared to other services. The company’s pivot towards gaming, offering subscribers access to a library of games, including titles like the remastered Grand Theft Auto trilogy, has contributed to its continued success. Netflix plans to expand its gaming offerings and recently inked a deal with WWE to enhance its portfolio.
While Netflix’s strategic decisions may bolster its financial standing, the discontinuation of the Basic tier leaves existing subscribers grappling with higher costs. The company acknowledges that its recent changes may not resonate positively with all users, highlighting the ongoing challenge of striking a balance between evolving business models and user satisfaction in the ever-evolving streaming landscape.