LONDON—As Netflix prepares to deliver its Q4 2022 earnings report later today, Wall Street and analysts will be paying particularly close attention to the impact Netflix’s new ad supported tier might have on its subscriber counts and financial fortunes.
An earlier December 2022 study from Antenna found that the ad-supported tier got off to a sluggish start in November of 2022, but new research from Ampere Analysis paints a different picture.
Ampere found that Netflix recorded its highest daily subscription sign-up rate in the U.S .since the start of the pandemic in April 2020 with the launch of its ad-supported plan on November 3rd.
The new report by Ampere Analysis found that the release of the ad tier led to a 58% increase in the streamer’s average daily sign-up volumes from 3rd to 5th November, compared to the three days before the launch.
Since the new plan was made available to subscribers, 8% of those signing up to Netflix or changing their plan have taken the ad-tier, Ampere reported.
Of those, three out of four are new sign-ups, mostly re-subscribers (64%), but also first-time users of the platform (36%).
According to the study, over 75% of new ‘Basic with Ads’ subscribers are stacking at least three Subscription Video on Demand (SVOD) services, with Amazon Prime Video, Disney+ and Hulu being the most common other choice.
The data also indicated that the new tier wasn’t significantly cannibalizing existing subscribers or drawing large numbers of subs from more costly tiers to the less expensive ad-supported plan.
One in four of the ad tier subscribers are existing Netflix users that have switched tiers. As expected, a large proportion (67%) of these come from the Basic tier – the most price-sensitive group of Netflix subscribers. One fifth of switchers (21%) moved from the Standard tier, and just 12% come from the Premium tier.
“Netflix’s ‘Basic with Ads’ tier, which is $3/month cheaper than the Basic tier, has succeeded at drawing back more price-sensitive Netflix subscribers who had previously churned,” explained Mayssa Jamil, analyst at Ampere Analysis. “In addition to this, with the strengthening of competitor services, the low $6.99 price point makes it more affordable to subscribe to multiple services at once, and has therefore also appealed to heavy stackers. Finally, some Basic tier users (who are more prone to churning as economic uncertainty and competition increases) have been downgrading to the ad-tier, which will aid customer retention in the long-term."
Data from Ampere’s Subscription Video Economics application tracks daily sign-up and cancellation activity of streaming services in the US, using a panel of several million households.
