Whelp, it’s actually happening, and sooner than we thought.
Greg Peters, Netflix’s Chief Operating Officer and Chief Product Officer announced this morning that the streaming giant’s lower priced, ad-supported subscription plan, called ‘Basic with Ads’, will launch on November 4.
In Australia, Basic with Ads will cost subscribers $6.99 a month, a four dollar drop from their current Basic plan, which is $10.99 a month. Basic with Ads will also launch in Brazil, Canada, France, Germany, Italy, Japan, Korea, Mexico, Spain, the UK and the US.
Currently, Netflix’s Basic plan allows you to stream shows and movies in Standard Definition at 480p. When Basic with Ads launches, though, both tiers will stream in “video quality up to 720p/HD”, per the company’s press release.
The statement goes on to say that the ad-supported tier will feature “four to five minutes of ads per hour”, which “will play before and during shows and movies”.
Subscribers of the Basic with Ads tier will also not be able to download content to stream while offline, and “a limited number of movies and TV shows won’t be available due to licensing restrictions”, something Netflix assures everyone they’re “working on”.
But why would Netflix start offering such a service? Well, because by some metrics they’re floundering. Within the first quarter of 2022, Netflix saw 200,000 people leave the service, which resulted in the company’s value plummeting.
Although they didn’t lose as many subscribers in the second quarter as some had predicted — they lost 970,000, rather than the 2+ million that some were expecting — Netflix hoped that the changes would stem the loss of customers and regain subscribers who would be happy to put up with ads if it meant paying less for the service.
“We’ve left a big customer segment off the table, which is people who say: ‘Hey, Netflix is too expensive for me and I don’t mind advertising,’” said Ted Sarandos, Netflix’s co-CEO, back in June. “We adding an ad tier; we’re not adding ads to Netflix as you know it today. We’re adding an ad tier for folks who say, ‘Hey, I want a lower price and I’ll watch ads.’”
Following the release of Netflix’s Q3 report, it appears the changes may be working. After losing subscribers in Q1 and 2, the streaming giant was pleased to report that it had gained 2.4 million net subscribers in Q3.
It’s a huge glimmer of hope for Netflix. In fact, they had only predicted they’d achieve one million additions during Q3, so it’s safe to say this is the best news they’ve reported in months. However, the struggle era isn’t over just yet.
You see, while 2.4 million net subscribers is a lot when compared to the previous two quarters of losses, it’s still a far cry from where the company was this time last year. In the 2021 Q3 report, Netflix had gained 4.4 million subscribers.
While they’re expecting to round out the year with another 4.5 million subscribers in Q4, that will still only bring the growth to about six million for the year — a long way from the 18.2 million they added in 2021, or the 36 million they added during the height of COVID lockdowns in 2020.
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In this article, we break down the changes Netflix is considering, why, and how it will impact Australians.
Why Is Netflix Introducing Ads and Cracking Down on Password Sharing?
Basically? Despite the huge success of shows like Squid Game and Stranger Things, they’re still not making enough money.
This year, many users have chosen to abandon the streaming giant, and that has been reflected in the company’s share price. In under four months, Netflix’s share price has dropped by two-thirds, after reaching its peak at the end of 2021.
On Wednesday, April 20, the company marked a share price plunge of 35.1% in just one day. This was the company’s largest one-day fall in over a decade.
What Changes Will Netflix Be Making?
Netflix Will Crack Down on Password Sharing
For years, people have been sharing their passwords to streaming platforms as a way to cut down on the cost of being subscribed to multiple services.
Until now, Netflix had allowed accounts to have multiple profiles, which allowed people residing in different households to share the same account.
With estimates that there are approximately 100 million households that are currently not paying for their own Netflix subscriptions, the streaming giant has decided to crack down.
One of the changes being trialled in Chile, Costa Rica and Peru currently is the ability to add sub-accounts for up to two people living outside the main residence, but it comes at a cost. To add a sub-account will cost an additional USD$3 (AUD$4) each month.
Netflix said that accounts being shared across different households was “impacting [their] ability to invest in great new TV and films for our members,” according to Chengyi Long, the director of product innovation.
“We’ve been working on ways to enable members who share outside their household to do so easily and securely, while also paying a bit more,” Long said in March.
While this change is currently being tested, there’s no word on if and when they plan to introduce it in Australia.
Netflix Will Introduce Ads at Reduced Subscription Price
Since its inception, one of the major benefits of paying for Netflix has been that there are no ads, but that’s set to change on November 4.
“Those who have followed Netflix know that I have been against the complexity of advertising, and a big fan of the simplicity of subscription,” said Reed Hastings, Netflix’s Co-CEO.
“But, as much as I am a fan of that, I am a bigger fan of consumer choice. And allowing consumers who would like to have a lower price, and are advertising-tolerant, get what they want, makes a lot of sense.”
However, new reports are stating that along with the ads will come a reduced range of titles to stream.
Per Deadline: “Ted Sarandos, Co-CEO and Chief Content Officer, admitted that the cheaper tier, which will be rolled out with Microsoft as its technology and sales partner, will not have all of its licensed content.”
There’s no word just yet on how many shows won’t be available to subscribers on the ad-supported tier.
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When Will These Changes Take Place?
After months of speculation about when these changes would take place, Netflix has confirmed that the ad-supported tier will launch on November 4, 2022.
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