Netflix’s ad-supported tier was its least popular plan

Netflix had 223 million customers globally at the end of September. Photo: Reuters
Netflix had 223 million customers globally at the end of September. Photo: Reuters

Summary

  • Streaming giant’s ad-backed plan accounted for 9% of new signups in the U.S. in November, according to subscription-analytics firm Antenna.

Netflix‘s new ad-supported plan was the least popular tier of its service in November, the first month in which the streaming giant offered it, according to subscription analytics firm Antenna.

The plan accounted for 9% of new Netflix sign-ups in the U.S. during the month. Some 57% of subscribers to the ad-supported tier in the first month were people re-joining the service or signing up for the first time, while 43% downgraded from pricier plans, according to Antenna.

The goal for streaming services that launch lower-cost, ad-supported plans typically is to recruit as many new users as possible, while minimizing those who trade down from more expensive plans.

Warner Bros. Discovery-owned HBO Max, which launched its own $9.99-a-month ad-supported plan in June 2021, had stronger early results, according to Antenna. HBO Max’s ad-supported plan accounted for 15% of new U.S. signups in the first month, and only 14% of the new customers were downgrading from its premium tier.

A Netflix spokeswoman said there were inaccuracies in Antenna’s figures. “It’s still very early days for our ad-supported tier and we’re pleased with its launch and engagement, as well as the eagerness of advertisers to partner with Netflix," she said.

Netflix launched the $6.99-a-month ad-supported plan in the U.S. on Nov. 3, part of a push to diversify its revenue and expand its subscriber base. Netflix’s more expensive plans, which cost between $9.99 and $19.99 a month, come with additional features. Some include higher video quality and allow more than one user to stream at the same time.

“Advertising for us is crawl, walk, run. We’re definitely ‘crawl’ right now," said co-Chief Executive Ted Sarandos earlier this month at an investor conference. Netflix hasn’t publicly forecast how many new customers it expects the new plan to draw.

By the end of November, 0.2% of Netflix subscribers in the U.S. were on the ad-supported plan, Antenna estimated. The streaming giant’s overall customer additions in the U.S. in November were lower than they were in October, Antenna found.

“The new plan thus far is not moving the needle" in boosting the average revenue Netflix gets from each subscriber, said Jonathan Carson, co-founder and chief executive of Antenna. “Is this going to drive new incremental growth? It’s super early," he said.

Antenna compiles data from third-party services that collect information from consumers, with their consent, such as online purchases, bills and banking records. That gives the company visibility into streaming subscriptions.

Netflix, which said it had 223 million customers globally at the end of September, joined a crowded field of streaming services with ad-supported tiers of service in the U.S. Walt Disney Co.-controlled Hulu and Disney+, Comcast Corp. NBCUniversal’s Peacock, Paramount+, and HBO Max all offer ad-supported tiers of service.

Selling ads helps the companies generate more revenue, on average, from its users. Plus, consumers who may otherwise cancel a subscription could opt for a less costly ad-supported plan and stick around.

Disney+ earlier this month launched its own rival ad tier as part of a price increase. Customers who didn’t want to pay the new $10.99-a-month price tag for an ad-free plan could continue to pay $7.99 monthly but would begin seeing ads.

For now, Netflix’s ad tier is most similar to what has up to now been its basic, lowest-priced plan, which has typically been its least popular. Subscribers to the ad tier can stream on one device at a time. The ad-backed tier doesn’t allow downloads. Mr. Sarandos said earlier this month that the company is likely to launch multiple ad-supported tiers of service over time.

“Consumers have shown that with the right proposition, they’ll really opt into advertising," Mr. Carson said.

In November, some 21% of HBO Max subscribers in the U.S. were on ad-backed plans, while 57% of Hulu subscribers used that type of plan, according to Antenna. Some 90% of Peacock subscribers are on its ad-supported plan, an NBCU spokesman said.

This story has been published from a wire agency feed without modifications to the text

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