Netflix's new “Basic with Ads” plan, the streamer’s ad-supported tier for budget-oriented consumers, is not off to a great start, according to a new report that gathers data from both Netflix and its competitors.
The company first launched “Basic with Ads” in early November, bringing down the cost of Netflix's lowest-priced option to just $6.99 per month and upgrading the video quality on both that and the ad-free “Basic” plan. Nevertheless, Netflix with ads has some caveats, mainly the exclusion of some popular shows from the streaming lineup and the inability to download content on the users’ devices.
As detailed in a new report from The Verge, those limitations have been enough to turn off subscribers from choosing Netflix's with Ads alternative. Only 9% of new users opted for the budget option in November, meaning “Netflix has returned money to advertisers after failing to meet viewership guarantees by as much as 20 percent.” That failure to meet expected targets contrasts with HBO Max's numbers. Analytics firm Antenna notes that 15% of new signups on Warner Bros.' streaming service choose the cheaper ad-supported version.
Nevertheless, across the entire industry, the bigger picture suggests Netflix and Disney Plus were right to launch their ad-supported tier for their subscriptions. Every other streaming service boasts a considerable amount of users sticking with the budget options. For example, 76% of Peacock's subscribers choose the ad-supported plan; 57% do the same on Hulu; both Discovery Plus and Paramount Plus have a 44% share; and, lastly, 21% of HBO Max subscribers come from its “with Ads” tier — Netflix with Ads has 0.2%.
While these numbers are quite reasonable considering Netflix with Ads just came out, the biggest challenge it will face is establishing the product among its 223 million users, all of which came onto the platform ad-free. To a lesser extent, Disney Plus will encounter a similar obstacle, as the new Disney Plus Basic plan (with ads) costs the same $7.99 a month that the ad-free version went for before, while the new Disney Plus Premium plan sees customers spend $10.99 to get rid of commercial breaks.
Figuring out how Netflix with Ads works was already a bit of a headache at launch, but Netflix and Disney will need to convince users of the real value proposition of watching commercials if the two companies are after advertiser money since downgrading to their cheapest subscription makes sense only for the tightest of budgets at this stage.
Related Forum: Gaming Discussion