Netflix’s plan to increase revenue without necessarily increasing the number of subscribers seems to be working. The most recent quarterly earnings report showed that Netflix’s password-sharing ban worked in the company’s favor, as more people signed up for new accounts after the ban. But Netflix is still testing the waters, as the average revenue per member (ARM) dropped by 3% during the quarter.
With that in mind, Netflix is considering other ways to increase revenue, including a Netflix subscription tier that would give users free access to some content. Also, Netflix is considering raising prices for its two remaining premium ad-free tiers… again.
When are new Netflix price hikes coming?
A few days ago, Netflix removed the Basic subscription tier from its offerings. If you already have the $9.99 option active, you can keep it for the time being. But a new report in Puck says Netflix is going for a clearer separation between the $6.99 ad-based subscription and the premium ad-free tiers ($15.49 and $19.99).
The ad-free plans deliver higher ARM than the $9.99 Basic plan, which is why Netflix chose to kill that option. The ad-supported plan is quite popular with consumers, with 18% of new subscribers in 2023 choosing it, per research firm Antenna. But according to Antenna data from October 2022 that Puck cites, most Netflix customers are on the Basic plan.
The report says that Netflix wants its ad-based tier to bring in 10% of the total revenue in the coming years. But to get there, Netflix might have to raise the prices for the premium ad-free options once again. The Basic plan was in the way of all that. From the looks of it, Netflix customers in international markets should expect the Basic plan to go away in the future.
As for price hikes for the premium plans, that won’t happen just yet, and Netflix’s CFO said during the recent earnings call the company decided not to raise prices again right now.
As someone who has defended Netflix’s password-sharing ban and the previous price hikes, I’m not particularly excited about the idea of facing yet another price hike. Especially considering that some of the people involved in making content for Netflix, or content that gets licensed to the streamer, are currently on strike, asking for better wages.
What about watching Netflix for free?
The purpose of the ad-based tier is for Netflix to also determine “how many commercials the lower-tier consumer will be willing to endure,” Puck explains. That’s because Netflix is also considering launching free Netflix subscriptions where users would not pay anything to watch ad-supported content.
The Netflix free access plan would let the company compete against the growing trend of free ad-supported television (FAST). The kind of TV experience you can passively consume without worrying about paying a monthly fee.
Puck says that a FAST Netflix plan might be imminent in increasingly saturated markets. Such a plan would be an ad-heavy version of the service that won’t require an account. It would also carry only a fraction of the catalog. It’s like network television with predetermined programming instead of on-demand content.
A free Netflix plan would compete directly with YouTube, an entertainment experience that’s at the core of the internet. You go on YouTube routinely. You don’t need a Google account to do it, and you don’t need to subscribe to the Premium paid version. The difference is that a free Netflix tier would stream only TV shows and movies, rather than user-submitted content.
Netflix CEO said in January that he was “open to all different models that are out there right now,” and that he was “keeping an eye on [the FAST] segment.” But that’s not enough to confirm that free Netflix is coming. Or that it’ll happen anytime soon.
The report also notes that Netflix’s success or failure at boosting revenue without meaningful subscriber growth will influence smaller competitors. If Netflix is successful at offering great ad-supported and ad-free experiences, others might follow its lead.