Netflix to get rid of ‘basic plan’ despite record earnings

Netflix reported record revenues and subscriber numbers in Q4 23. “Our healthy top line growth reflects the benefits of paid sharing, our recent price changes and the strength of our underlying business driven by a strong slate,” it said in the accompanying letter to shareholders. “Revenue was $0.1B (2%) above our October forecast due to favorable F/X movement and stronger than anticipated membership growth. Paid net additions totaled 13.1M in Q4’23 vs. 7.7M in Q4’22 — our largest Q4 ever.”

“In Q4‘23, like the quarter before, our ads membership increased by nearly 70% 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. 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.”

So now, in the UK, you can have ad-supported membership for £5 per month, standard without ads for £11, and premium (which gives you more members and supported concurrent devices) for £18. Those (including your correspondent) who are already on the £8 basic ad-free tier can stick with it (for the time being) but it’s now closed to new subscribers as detailed above.

This move is consistent with a broader trend towards the introduction of ads to paid-for subscription video on demand services. The time-honoured dealer technique of offering a product at low prices, only to yank up the cost once they’re hooked, was always inevitable in the SVoD space. There is a presumed maximum household budget for such services and, with competition so fierce, ads would appear to be the easiest way to grow revenues, especially if everyone else is doing it too.