Advertising-financed streaming is likely to gain in importance in the future. Streaming giant Netflix has also jumped on the trend and launched its “Standard with ads” tariff last year – but the cheapest ad-free offer has now been canceled in some countries.
• Netflix in transition: Cheaper subscription model with advertising & action against sharing passwords
• Canceled Basic plan in Canada, US and UK for new and rejoining members
• Significance of advertising-financed streaming is likely to increase
The streaming giant Netflix is changing: Reed Hastings, who resigned from his position at the beginning of the year, has long resisted advertising on the service and tolerated the sharing of passwords. But last November, in response to increasing competition in the streaming market, Netflix introduced a cheaper model with advertising in addition to its previous subscription models, and the company is now also taking action against the sharing of passwords outside of a household. Another step towards advertising-financed streaming followed.
Canada is followed by the USA and the UK
At the end of June, blogTO already reported that Netflix had secretly discontinued its basic subscription model in Canada. Now the streaming giant has dropped its cheapest ad-free offer in the US and UK as well. On the Netflix website, the Help Center for Canada, US, and UK subscription plans states: “The Basic plan is no longer available for new or rejoining members. If you are currently on the Basic plan, you can remain on that plan until you change plans or cancel your account.”
In its second-quarter earnings letter to shareholders Wednesday, Netflix said, “For an improved monetization more sophisticated pricing and planning strategy is important. During the first quarter, we lowered prices in a number of underdeveloped markets, and during the second quarter, we phased out our ad-free Basic plan for new and rejoining members in Canada (existing ad-free Basic plan members are unaffected). We are now doing the same in the US and UK. We believe our entry-level prices in these countries – $6.99 in the US, £4.99 in the UK and $5.99 in Canada – offer consumers excellent value given the breadth and quality of our catalogue.”
Offer with advertisements seems to work
With Netflix already phasing out the basic plan for new and returning members in Canada and, as Cord Busters reported, in the US and UK beginning to hide the basic plan when new users wanted to sign up to the platform, requiring them to select “See all plans” to see the basic plan as an option alongside the other plans, it should come as no surprise that the cheap ad-free plan has now been scrapped in those countries as well.
In any case, the approach of winning users with a cheaper offer with advertisements seems to work: Netflix reported as part of its figures template that the number of users of the tariff had almost doubled within three months. In addition, thanks to the ad revenue, Netflix is already making more revenue per user worldwide with its “Standard with ads” tariff than with its ad-free basic subscription. In the US, the revenue per user in the advertising model, which is available there for $6.99, even surpassed that of the standard subscription for $15.49.
Advertising-financed streaming is likely to gain in importance
The importance of ad-supported streaming could increase in the future. As the German Press Agency reported at the end of last year, according to a study by the management consultancy Deloitte, half of all major streaming services are likely to introduce so-called “Free Ad-supported Streaming Television” (FAST) channels by the end of 2024 in addition to paid subscriptions. In this case, users do not have to pay any money for the streaming offer – it is financed purely with advertising. In addition, the study predicts that by 2030 all streaming offers will be completely or mostly financed by advertising. In addition to Netflix, competitor Amazon has also jumped on this trend with its Freevee offering.
It remains to be seen whether the basic model will soon be abolished in other countries after Canada, the USA and the United Kingdom.
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