Netflix Is Getting Rid Of The Cheapest Ad-Free Subscription In The US And UK, But Why?
Netflix has gotten rid of its Basic streaming plan in both the U.S. and U.K., leaving viewers with one less, affordable option when it comes to the biggest streaming service in the game. Just ahead of the company's quarter two earnings report today, it has been revealed that the cheapest streaming plan that didn't have ads is no longer going to be available for new or returning customers. Those who are already subscribed to the plan will be able to keep it unless they opt to cancel or change their plan, for now at least.
As reported by Variety, the Basic plan, which cost $9.99 in the U.S., is no longer available for new users, leaving viewers with the option of either the Standard With Ads plan for $6.99 per month or the Standard plan for $15.49 per month. The Basic plan had already been removed in Canada recently, with Netflix seemingly planning to get rid of that option in other markets around the world. Viewers will now have to choose between putting up with ads or paying more money.
This comes at a time when the streaming business is in a major period of transition. Netflix and other companies are forced to reckon with high spending, debt, and slowing subscriber growth while trying to appease Wall Street in an overly crowded marketplace. Let's not forget the fact that not one but two major Hollywood unions are on strike right now, with payments from streamers to actors and writers largely at issue. So now it's about getting the most out of every single subscriber from here on out.
Getting the most out of subscribers
So why would Netflix remove this option for potential subscribers? It all has to do with the amount of money they can make per subscriber. For years, the company resisted implementing an ad-supported plan, as people generally loved not having to deal with commercials after spending years doing so on cable. But when subscriber growth leveled out, Netflix decided to give it a shot. It was a big success, with the ad tier accounting for more than 7.6 million sign-ups last quarter.
Netflix has come close to leveling off in terms of subscriber growth and the ad tier is pretty much accounting for whatever growth they are seeing now. The other thing to consider is that the Basic plan probably accounted for far less actual revenue per subscriber, which is hugely important. The ad plan generates ad money in addition to the subscription fee, while the Standard plan is straight-up more expensive. It's not all that hard to figure out why Netflix is removing the Basic plan now, as the company is clearly trying to maximize profits.
We'll likely be hearing more about this move soon when Netflix reports its second-quarter earnings later today. Stay tuned.