Netflix (NASDAQ: NFLX) has made the strategic move of discontinuing its basic ad-free plan in the U.S. and the UK, aiming to attract more subscribers to its ad-supported tier. The $9.99-a-month basic plan, which allowed users to watch shows and movies without commercials, will no longer be available for new or rejoining members, though existing users can continue on the plan until they change or cancel their subscription.
Last November, the streaming video pioneer introduced a $7-per-month option with commercials in 12 markets, including the U.S., to provide an alternative to ad-free plans. This decision was taken to entice more customers and diversify revenue streams amidst growing competition in the online viewing space.
In May, Netflix also took measures to combat password sharing among households, prompting users who share accounts outside the same home to pay an additional fee. This move led to an influx of subscribers opting for the cheaper ad-supported tier.
According to Macquarie analysts, the crackdown on password sharing is expected to serve as a catalyst in driving more users to the $6.99 ad-supported base, thereby generating increased advertising revenue for the company.
In May, Netflix announced that its ad-supported tier had attracted nearly 5 million active users per month, highlighting the variety of programming available to potential advertisers.
As of June, Netflix had accumulated more than 238 million subscribers, adding 5.9 million members since March, surpassing expectations. The company’s efforts to rekindle growth following a dip in subscribers last spring have proven successful.
Nevertheless, Netflix faces challenges from ongoing strikes in the U.S. by writers and actors, impacting content production schedules. Despite this, the streaming giant remains well-positioned in the entertainment industry, with a large library and international production capabilities.
The recent revenue figure of $8.18 billion for Netflix disappointed some investors, indicating a mere 2.7% increase from the previous year. Profits amounted to $1.49 billion; however, Netflix expects advertising revenue to drive a change in this trend by the end of the year.
Netflix last traded at $477.59 on the Nasdaq, dropping more than 6% when the markets opened Thursday.
Information for this story was found via Reuters, BBC, and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
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