Netflix Reportedly Considering Free Plans in Some Countries; Could They Come to the United States?
The world’s largest streamer may be maxing out in terms of subscribers, and new ad revenues may be its best shot for growth in coming years.
There’s only one way for streaming prices to go in the near future, right? Anyone who has observed changes in subscription costs over the past year could certainly be forgiven for thinking so, as nearly every major streamer has hiked the price of ad-free viewing in that time. Netflix has gone further by cracking down on password sharing and discontinuing its least-expensive ad-free plan, so viewers may be shocked to hear the company is considering launching new, free plans in some territories. The streamer has considered free plans before, but the latest reporting on the matter indicates it may have to get creative with its offerings if it wants to keep its status as the world’s largest and most profitable streaming service.
Key Details:
- Netflix is considering the launch of free plans in European and Asian territories as a way to boost ad revenues.
- There are no plans to introduce free Netflix streaming options in the United States at this time.
- Free tiers would allow Netflix to sell more ad inventory and help it better compete with Disney, Comcast and Google.
Lucas Shaw of Bloomberg reports that people familiar with Netflix’s plans say the company has discussed creating free streaming options in Europe and Asia. In January 2023, Netflix co-CEO Ted Sarandos said that the company was “open” to such a possibility, and that he was “keeping an eye” on the free ad-supported TV (FAST) segment as more viewers flocked to free streaming platforms.
The creation of free streaming options in these areas would serve as an on-ramp to more paid subscriptions, and it would allow Netflix to collect ad revenues from viewers who only choose to engage with the free plan as well. There are no plans to launch a free streaming tier of Netflix in the United States, as the company already has deep penetration within its addressable market; in other words, there isn’t a big enough number of people who could have Netflix but don’t to warrant the launch of such an option domestically.
Why Does Netflix Need New Sources of Ad Revenue?
Netflix may have more streaming customers than any other service, but when it comes to ad sales the company is far behind other platforms and firms like YouTube, Disney and Comcast. The asking price for ad space on Netflix is high, and it tries to limit the number of ads per hour it shows its viewers in order to continue standing apart from linear TV. That has led to fewer impressions overall; a survey from May showed that Netflix was not even in the top seven creators of ad impressions during 2023.
Netflix currently enjoys the status of the world’s largest streaming service in terms of subscribers, and has managed to create healthy profit margins in a time where even the streamers of corporate titans like Disney and Amazon are still struggling to clear the red off their balance sheets. But its failure so far to create the kind of ad revenue that other companies are generating means it has to get a bit creative.
The streamer revealed in May that it had 40 million ad-supported monthly active users around the world. But Shaw reports that the number of paid subscribers buried within that total is far smaller, and that its ad plan lags behind competitors in the United States, both in terms of customers and ad sales.
That’s why even though there are no plans to introduce free Netflix plans in the United States now, there could be a shift in that thinking in the future. As noted above, Netflix already reaches the majority of its addressable market in the U.S., but there are still plenty of viewers out there who think of a streaming subscription as disposable until a new show or movie they want to see comes along. Free, ad-supported streaming options can keep viewers engaged with a Netflix product in some form or other while they await a new season of “Stranger Things” or “Bridgerton.”
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Ad revenues are a key piece of the puzzle for streamers as they try to maximize profits. Netflix is ahead of the competition on the profit front, but it needs to boost revenue generated by its advertising segment before it can claim to be one of the leaders in the industry in that regard. That’s why the company is considering free, ad-supported streaming options in some territories, and why they may come to the U.S. at some point in the more-distant future.
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.