35% of Netflix users in 2017 had the basic $9.99 plan.
27% was that number by 2018.
Survey’s now show that plan is around 18-20% of US users.
Netflix most commonly used plan is the standard plan, which has risen to number one and is over 50% of US subscribers at $15.99 a month.
Premium at $19.99 and basic at $9.99 are at a borderline tie, where surveys suggest they go back and forth for second place often.
Netflix announced they’ll be doing a new tier, which is an ad tier, where subscribers can pay less to get ads in between shows/movies.
A model Netflix opposed for years, but after Hulu, Peacock and Paramount+ all have had some success doing it, they’ve decided to join on.
The official statement is Netflix is doing this to try and add 6.7 billion in revenue the next 1-3 years off reduced prices, but here’s why this is likely just a stunt to get people paying more long term.
The target price Netflix announced for the ad tier will be $7-9.
Not a huge discount, where it’ll be anywhere from 10-30% cheaper off the basic tier.
The plan also involves 4 minutes of ads for every hour of streaming, so a 1 minute ad every 15 minutes.
Netflix plans to charge advertisers $65 per 1,000 views. A number which is pretty unheard of, but they are hoping for more cable ad style prices.
3.2 hours was the average daily watch time on Netflix per day in May of 2020, which fits around the same as 2018 and 2019 numbers.
In that situation, a person would get 12-13 ads per day.
Putting 12.5 as the ads per day, over a period of 80 days, Netflix would make $65, which is over half the revenue Netflix would make on a $9.99 basic plan in four months, over what that plan brings in over a year.
Which this would be great for Netflix, because they’d make way more money and still have something like a $7 initial fee.
The problem is this is likely a complete fantasy Netflix put out.
$65 is an unheard of cost per thousand views, where some reports show it’s 3-4x what Hulu, Paramount and Peacock are charging advertisers.
In fact, Peacock, which launched as a largely freemium model found a huge issue, where over 80% of users just did the ad model, didn’t pay anything and they were losing money until limiting more shows/movies people can see on the free tier.
This makes me believe the profit from ads isn’t about the ads themselves, but about moving people to the standard tier at $15.99.
If the ad plan launches at $7, it’ll likely be similar to Disney+, which had an $8 launch price and now is moving to $9.99 a month and over the course of the next few years will probably hit $15 or $20 a month also.
Netflix with ads is probably going to try and launch on a $7 ad tier, a price point that’d be more profitable with ads over the $9.99 basic tier and eventually phase that out to make the basic tier and the ad tier one of the same.
The goal though is less about making money on the ads, but more about moving the standard tier of $15.99 from being around 50-60% of subscribers and having the basic tier becoming something like 10%.
Overall, I don’t think this is a good plan and feel in a streaming war where Netflix is losing ground on content, adding ads just makes them look like a cheaper service and less premium.
The other issue is if ads are the long term goal, they’ve entered into a way more unstable market, where with every game, social network, search and more containing ads, what advertisers pay will eventually drop for everyone.
This feels like it belongs in the bad idea folder, when all they really need is to make good content that can turn into merchandise, video games, board games, amusement parks and more.