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Netflix's ad-supported plan arrived with a thud as streamers battle inflation and subscription fatigue

Wednesday, December 21, 2022 by Robinhood Snacks |
*Click* (Chesnot/Getty Images)

Click (Chesnot/Getty Images)

Skipping the intro… and the ads along with it. Netflix's new advertising-supported tier, launched early last month, accounted for only 9% of November sign-ups, according to estimates. The $7-a-month plan represents the Flix's bid to diversify revenue and pull in more subscribers with a less expensive offering. It came toward the end of a roller-coaster year for the streamer, which included subscriber losses and layoffs. Now, some early results are in:

  • Press save: 43% of new ad-tier subscribers downgraded from an existing Netflix plan.
  • Cord and cost cutting: The other 57% of sign-ups were a combo of brand-new subscribers and people rejoining after previously canceling subs.

Binge-watching… your fave 30-second commercials. Netflix isn't the only streamer to offer an ad-supported tier, but it is arriving late to the party. As of last month, more than 20% of rival HBO Max's subscribers were estimated to be on its ad plan (which launched mid last year). That # is 57% for Hulu subscribers, and 90% for Peacock. Still, Netflix has lots of room to grow: it boasts 223M subscribers (as of September) vs. HBO Max owner Warner Bros. Discovery's 95M — both of which dwarf Peacock's 18M.

THE TAKEAWAY

Ads are a vital tool in streamers' arsenals… if they can figure out how to wield them. Companies like Netflix are battling pervasive subscription fatigue and inflation headwinds (picture: higher prices squeezing customers' entertainment budgets). Ad-supported tiers represent a way both to woo on-the-fence viewers and to retain those looking for the exits. But as Netflix's early #s suggest, they can cut both ways: cheaper options might cannibalize existing premium customers. Meanwhile, the Flix said it's "very early days" for its ad-supported plan, suggesting the ad-based streaming surge is only just beginning.