Netflix Dropping Cheapest Ad-Free Plan is Latest Move in Long Line of Major Changes to Increase Profitability
Netflix Dropping Cheapest Ad-Free Plan is Latest Move in Long Line of Major Changes to Increase Profitability
The new week started with reports of a major change for Netflix’s Canadian users. The streaming giant has confirmed that it is no longer offering Netflix Basic— its cheapest ad-free tier — to new users; existing users who are on a different plan will stop seeing it offered in the near future, but customers who are already signed up for Netflix Basic in Canada will be able to continue on the plan for the time being.
American users and other global Netflix customers who are concerned that they could be the next territory to see Netflix Basic disappear are likely asking why the service decided to revoke the $9.99 per month ad-free plan in Canada. The answer, quite predictably, is mostly about money.
Netflix finally unleashed its long-promised restrictions on password sharing on North American customers in May. Those restrictions stipulate that users who want to give access to their Netflix account to someone who doesn’t live in their home must pay an extra $7.99 per month to keep the extra user. That’s more expensive than having the extra person sign up for their own ad-supported Netflix plan at $6.99 per month, giving the company one more way to monetize an audience that it didn’t have the ability to take advantage of before.
There’s a reason that Netflix’s ad-supported plan is cheaper than adding a sub-user onto an existing account. Ad-supported video-on-demand (AVOD) streaming introduces a second revenue stream in advertising dollars, which combines with subscription fees to more efficiently monetize a user even if the subscription cost is lower than an ad-free plan. That’s a big reason that Netflix launched its Standard with Ads plan in November, and why it upgraded some features of the plan in April to attract more customers.
All of these changes are in service of the highest goal at Netflix: boosting profitability. Netflix is the sole member of the American subscription streaming community that regularly shows a profit, and it quite understandably enjoys its position on top of the heap as the world’s largest streaming service.
Password sharing rules, a new ad-supported tier, discontinuing its cheapest ad-free plan; all of these moves are intended to help Netflix improve its bottom line. Users can at least rest assured that their money will be reinvested into things they want the most; Netflix is in the top five of the streaming industry in terms of content spending in 2023. The company is investing heavily in its mobile games, and will reportedly produce its first live sporting event this year.
All of that costs money, and Netflix is clearly willing to spend dollars to make dollars. But part of the equation that has led to Netflix’s financial success has been knowing the best ways to monetize its users, and the elimination of its Basic price plan in Canada is just the next tactic in executing the company’s grand strategy.
Netflix
Netflix is a leading subscription-based video streaming service that offers on-demand access to an extensive library of over 3,000 movies, 2,000+ TV shows, and a growing collection of acclaimed Netflix originals. Renowned for producing groundbreaking content, Netflix has become a cultural powerhouse with hit originals like “Stranger Things,” “Wednesday,” “Squid Game,” “The Crown,” “Tiger King,” “Bridgerton,” “The Witcher,” and “Black Mirror.”