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Netflix’s new ad tier doing better than expected

Remember when we covered Netflix’s new ad tier plan a few months ago and many predicted it wouldn’t work due to its high ad, high price factors? Well many predictions prove incorrect as the new ad tier seems to be going very very smoothly for the streaming giant. In fact, Netflix’s new ad-supported tier accounted for 13% of the streamer’s subscribers in its first month. 

It started back in November when Netflix rolled out $7-per-month Basic with Ads to jumpstart subscriber growth and create a new revenue stream from ads. The goal is to attract new subscribers and advertisers while limiting how many people trade down from Netflix’s existing, higher-priced plans.

According to a survey by Evercore, Basic with Ads was Netflix’s least popular tier, with the rest of respondents on its more expensive Standard (34%), Premium (27%), and Basic (25%) plans. The survey polled 1,500 people in the US and 2,000 in France and Germany in late December. 

“While very early days, we believe the company’s BWA (Basic with Ads) offering is driving solid incremental subscriber growth,” Evercore wrote in its report, noting about half of new Basic with Ads subscribers are new to Netflix and that Basic with Ads could keep as many as half of current subscribers from churning.

At only two months old it’s safe to say that it could definitely be too early to judge the success of the ad tier and that it could take a couple of years for Netflix to amass enough viewers to build a meaningful advertising business. Some hiccups have occurred in this birth period with Netflix letting advertisers take money back after some ad campaigns fell far short of their viewer targets. 

Netflix’s ad tier was followed close behind Disney+ with Ads launching in December, and Warner plans to launch a combined Discovery+-HBO Max app in spring with an ad-supported tier.

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