Earlier this year, Netflix announced its plan to remove its basic ad-free subscription plan in an effort to drive up revenue through its ad-supported plan. According to new report by ADWEEK, subscribers in the canceled tier now receive emails about automatically switching to the cheaper ad-supported plan.
“Your Basic plan is being discontinued, and your new $6.99 Standard with ads plan automatically begins on your next billing date,” read one customer’s email from Netflix.
The email went on to explain what users can expect from the ad-supported plan, highlighting its lower price, HD video quality and the ability to watch and download the app from two devices at the same time. It also assured users that ads will not play on kid profiles or in the middle of scenes. Basic plan subscribers may upgrade to the streaming service’s Standard no-ads tier if willing to pay $15.49 a month, but if no action is taken, they will automatically be switched to the Standard with ads plan for $6.99 a month.
Netflix’s move to eliminate its basic plan was made to emulate the success other streaming services like Disney+ and Amazon Prime Video have had with the launch of their ad-tier subscriptions, as well as to draw in advertisers with the promise of more ad-tier users.
“For advertising to become a driver of revenue growth for the company, Netflix must demonstrate a fertile, addressable audience to lure big brand ad dollars,” Mike Proulx, vice president and research director at Forrester, said via ADWEEK. “Netflix shuttering its Basic plan and, effectively, forcing those subscribers into its ad-based plan will no doubt douse it with accelerant.”
While some users may be upset about the changes to their subscriptions, Netflix executives are not worried about cancellations. For starters, their decision to switch only basic plan subscribers to the ad-supported plan is much less aggressive than Prime Video initially moving all its subscribers to their ad-tier. Secondly, research shows that consumers are willing to put up with ads on streaming so long as they don’t have to pay higher prices.
“Any protest would be minor,” Ross Benes, a senior analyst with eMarketer, said via ADWEEK. “There are constant ‘boycotts’ of Netflix and others over content, pricing, etc. — that has little to no effect on Netflix’s audience size or the streaming market. Viewers will complain more than they will cancel.”
It remains to be seen how this change will impact Netflix’s earnings and relationship with its subscribers in the long run. However, if users if users are upset about being switched to the Standard with ads plan, they can still upgrade to the Standard no-ads plan or even the Premium plan for an extra price.