American multinational video streaming platform Netflix announced on Wednesday that its ad-supported subscription tier has reached an impressive milestone of 15 million active users per month. This achievement comes exactly a year after the streaming giant introduced the more affordable plan, aiming to rejuvenate subscriber growth and bolster its revenue following a period of stagnation.
According to a Reuters report, the company had five million monthly users on the ad-supported tier back in May. Netflix’s strategy to increase prices for its ad-free options was designed to incentivize more subscribers to opt for the ad-supported tier, which generates additional revenue through commercials.
Last month, Netflix implemented price hikes across its Basic and Premium tier plans in the United States, the United Kingdom, and France. This decision follows the streaming giant’s robust subscription growth, accumulating 8.8 million new members, thereby escalating its total user base to 247.15 million. This substantial increment from the previous figure of 238 million in July signifies a positive trajectory for the company. This resurgence in subscriber growth prompted Netflix to take advantage of the opportunity to increase its pricing.
Interestingly, after resisting commercials for several years, Netflix had a change of heart in April 2022, driven by a loss of subscribers during the first quarter of that year. Subsequently, the streaming giant introduced its ad-supported tier, which quickly gained traction.
In a competitive move, Disney+ followed suit by launching its ad-supported version a month after Netflix’s introduction, to improve its streaming business’s profitability. Other streaming services such as HBO Max, Paramount+, and Peacock have also adopted ad-supported versions, emulating the long-standing business model that has supported the television industry. Looking ahead, Amazon’s Prime Video is set to join the ranks of streaming competitors in introducing ads and a higher-priced ad-free tier next year.
As Netflix continues to evolve its subscription offerings, the success of its ad-supported tier signals a shift in consumer preferences and a willingness to accept commercials in exchange for more affordable access to the platform’s extensive content library. This strategic move not only bolsters Netflix’s revenue but also positions it favorably in the competitive streaming landscape.