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Netflix’s Ad-Based Plan Didn’t Do So Hot in Its First Month

The tier accounted for only 9% of new signups in November, according to subscription analytics firm Antenna.

Evan Peters as Jeffrey Dahmer in "Dahmer. Monster: The Jeffrey Dahmer Story."

“Dahmer — Monster: The Jeffrey Dahmer Story.”

SER BAFFO/NETFLIX

When Netflix launched its ad-based subscription tier on November 3, it came as part of a concentrated push from the service to aggressively increase its subscriber base and strengthen its revenue after a messy year filled with decreasing subscriber numbers and falling stock. So a month later, did it succeed? It’s still early in the ad tier’s life, but the signs point to no.

According to the Wall Street Journal, subscription analytics firm Antenna is reporting that the ad-supported plan was the least popular Netflix tier during its first month of availability, accounting for only 9 percent of new signups. Fifty-seven percent of subscribers to the tier in the first month were new signups, while 43 percent downgraded from more expensive plans.

For comparison, when HBO Max’s ad tier launched for $9.99 a month in June last year, Antenna reported it drove 15 percent of new signups in the United States during its first month, with 14 percent of new customers downgrading from the premium tier.

In a statement to the Wall Street Journal, a Netflix spokesperson claimed Antenna’s figures had inaccuracies and did not account for the full picture of how the ad-supported tier is performing.

“It’s still very early days for our ad-supported tier and we’re pleased with its launch and engagement, as well as the eagerness of advertisers to partner with Netflix,” the statement reads.

Overall, Antenna estimates that roughly 0.2 percent of Netflix’s overall subscriber base in the United States is on the ad-supported plan. The firm’s numbers are based on data compiled from third-party services that collect information from consumers via transactions like banking records, bills, and online purchases. Antenna also estimated that new November subscriptions for Netflix were lower in the United States than they were in October before the ad tier launched.

Part of the problem is that Netflix’s ad tier, which is a cheap-for-streaming $6.99-a-month, currently resembled its cheapest non-ad tier, the $9.99 basic plan that has the worst video quality and has historically been the least popular tier on Netflix.

In its earliest days before it began producing original shows, Netflix sold itself on its lack of ads, with the ability to watch shows at home without interruption as its strongest selling point. Even as the company evolved, its leadership remained resistant to the idea of an ad tier, with CEO Reed Hastings saying in the streamer’s Q4 2019 earnings call, “We want to be the safe respite where you can explore, get stimulated, have fun, enjoy, relax — and have none of the controversy around exploiting users with advertising.” Evidently, the switch-up in Wall Street’s views of streaming — now valuing profits over subscription numbers — made those fears of exploiting users go away.

The ad tier is one of many ways in which the company has attempted to recover from its early-year losses. The other way is through the curbing of password sharing, through features like profile transferring and allowing users to kick profiles off of their accounts.

The streamer isn’t the only one to launch an ad tier this fall, as fears of a looming recession increased. Disney+ launched a $7.99 monthly ad plan on December 8, accompanying a price hike on the streamer’s standard ad-free plan.

Although Netflix’s ad-supported plan, for now, is merely a fractional part of the streamer’s business, other ad plans have proven to be successful for other streamers. Ad-based subscribers account for 57 percent of Hulu’s userbase, according to Antenna, while 21 percent of U.S. HBO Max are on the ad tier. For NBCUniversal’s Peacock, which launched last year and has struggled to break out, a whopping 90 percent of its subscribers use the ad-based plan.

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