Netflix CFO: Password-Sharing Rules Working as Intended, But More Users Opting for Ad-Free Plans Currently
It’s been nearly four months since Netflix handed down its official guidelines for account sharing. The concept of rules against account sharing caused no end of consternation amongst users when they were first announced, but as it stands Netflix has not seen much in the way of churn because of those guidelines.
Company CFO Spencer Neumann spoke about password-sharing rules at the 2023 Bank of America Media, Communications and Entertainment conference this week. He made the surprising revelation that while Netflix was converting plenty of account-sharers to their own paid subscriptions, the majority of those users were opting for an ad-free plan instead of Netflix’s Standard with Ads tier.
“The ad tier is a healthy mix in general across our plans, but it’s the minority because we have multiple plans,” Neumann explained. “It skews a little bit more towards ad-free in these spin-offs, so still a healthy kind of proportion going into the ad tier but a little bit higher mix into the ad-free relative to organic sign-up, which makes sense because a lot of these folks have been enjoying Netflix for a long time ad-free. So it’s slightly skewed in that direction.”
Netflix’s ad-supported plan is $6.99 per month, and its cheapest ad-free subscription is now $15.49. It’s definitely a bit of a shock to hear that so many former sharers have thrown price considerations out the window in order to continue streaming without ads, as they’ve become accustomed to doing on Netflix. It certainly explains why the company discontinued its cheapest ad-free tier for new subscribers in July.
The fact that so many users are signing up for ad-free Netflix plans would seem like good news for the company, since they’re more than twice as expensive as opting for the ad-supported tier. But streaming services make more average revenue per user (ARPU) from ad-supported plans, which allow them to double dip by collecting subscription money from customers as well as advertising dollars based on how many people see ads while watching.
A survey from Antenna found that as of June, only 18% of new Netflix sign-ups were for its ad-supported plan. That’s half the number of new customers who are choosing the ad-supported version of Disney+, and considering both plans launched around the same time in 2022, Netflix must be disappointed that Standard with Ads seemingly can’t gain more traction.
Customers can expect Netflix to do more to make the Standard with Ads plan attractive if these trends continue. The company has already made improvements to the video quality and upped the number of simultaneous streams on the plan; if those don’t work, users should be on the lookout for a price increase to Netflix’s ad-free plans in 2024.
Netflix
Netflix is a subscription video streaming service that includes on-demand access to 3,000+ movies, 2,000+ TV Shows, and Netflix Originals like Stranger Things, Squid Game, The Crown, Tiger King, and Bridgerton. They are constantly adding new shows and movies. Some of their Academy Award-winning exclusives include Roma, Marriage Story, Mank, and Ma Rainey’s Black Bottom.