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Netflix dumps cheapest ad-free plan for new subscribers

New subscribers will soon miss out on one of Netflix's cheapest tiers. <i>Photo: TND/Getty/Netflix </i>

New subscribers will soon miss out on one of Netflix's cheapest tiers. Photo: TND/Getty/Netflix Photo: TND

If you’re reconsidering your cancelled Netflix subscription, you better hurry up: One of the cheapest subscription options is about to become unavailable.

In a letter to shareholders on Wednesday, Netflix announced it will phase out its basic plan in Australia from next week, along with Germany, Spain, Japan, Mexico and Brazil.

For now, this will just affect new or rejoining members, who will only be able to choose from two ads-free subscription tiers instead of three.

At $10.99 per month, the basic plan is currently the cheapest ads-free tier, with the cost of the standard tier sitting at $16.99, and premium at $22.99.

The streaming platform has already pulled the basic plan from the US, the UK, Italy and Canada, and this week reported the move boosted adoption of its ad-supported and standard plans.

There’s also an unpleasant surprise in store for existing members in the UK, US and France, as Netflix will once again hike prices for all tiers except the ads and standard plans.

No announcement regarding price hikes in Australia have been made yet, but they will likely trickle down within a few months of international changes.

When asked to confirm when a price increase for the standard tier will arrive, Netflix co-CEO Greg Peters did not provide any details – but didn’t rule the move out.

“Our goal and plan is to continue to be a great entertainment value, and beyond that, we’re not going to comment on other price changes or other changes on tiers,” Peters said.

“We’ll sort of find our way based on that philosophy, and see when the right time to ask customers to pay a little bit more would be.”

Paying more for less options

The lack of basic plan options means prospective members who would have been attracted to that price point will either have to pay more for the standard plan, or be willing to sit through ads for the cheaper tier.

This will likely not just affect new members or those who had previously cancelled their own Netflix subscriptions, but also people who lost access to the platform after its crackdown on password-sharing.

By forcing more people to choose between the ad-supported tier (which will see Netflix profit off advertisements in addition to subscriptions) and the standard plan (which costs members $72 more per year than the basic), the company will likely turn a pretty penny over the next quarter.

New membership numbers swelled by 8.7 million over the year’s third quarter to reach 247.1 million paying households.

In countries where Netflix has introduced its ads plan, the tier accounted for 30 per cent of new sign-ups.

Netflix may be attempting to soften the blow of the basic plan loss by sweetening the deal of the ad-supported plan.

Next month, the ads plan will finally support downloads like the rest of the tiers, and Peters said it now also offers access to 95 per cent of content already available on the ads-free plans.

But increasing profit is certainly the bottom line for the company, even though it recorded a massive operating profit of $5.4 billion over the year to date.

This represented an operating margin of 21.9 per cent – a 4.1 per cent increase compared to its operating margin in 2022.

Despite the healthy profit, Netflix co-CEO Ted Sarandos (who is set to be paid up to $40 million this year) emphasised the cost of the platform’s content has risen.

“We know programming costs themselves rise nearly every year, primarily driven by competition; competition for talent, competition for shows and films,” he said.

Netflix executives also insist members are getting more value for money, despite its cheapest tier now forcing them to pay to sit through ads in an eerily similar format to the traditional TV model that Netflix had disrupted.

While some of the plans are cheaper than a movie ticket, Netflix is not the only streaming platform in many Australian households, who subscribe to an average of 3.4 streaming video on demand services.

But it tends to be the first to go when people tighten their belts.

And cutting down offers big savings during the cost-of-living crunch, with the basic plan subscriptions for the three most locally popular streaming platforms (Netflix, Prime Video and Disney+) amounting to $371.64 per year.

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