Netflix's closure of 'Basic' in Canada

With the news that Netflix Canada is closing its $9.99 Basic option (the 'basic' tier was the cheapest streaming subscription tier that doesn’t include ads; new customers, or customers changing plans, can now only opt for either the $5.99 ad-based tier - 'Standard with ads' - or pay $16.49 a month for 'Standard', or, of course, 'Premium' at $20.99), I've taken a very quick look at what forgoing the ‘Basic’ tier might mean for Netflix, using data on NFLX US from Antenna.

Netflix’s ad-tier got off to a slower start that Disney+ and HBO Max – Antenna has the share of new sign-ups in month 1 taking the ad-tier at 20% for Disney+, 14% for HBO Max (now ‘Max’) and 9% for Netflix. But, as Antenna points out – Netflix’s ad supported plan is only available at the basic end – and if you look at the mix of Netflix sign ups through that lens it’s a different picture; in January of this year the portion of Netflix basic sign-ups who opted for the ad-supported plan was?54%?of all basic tier sign-ups.

You can see from the chart below that the proportion of ‘basic’ sign ups not taking ads is shrinking. So, perhaps Netflix are being opportunistic with this segment, taking a (no doubt heavily modelled and calculated) punt that those that do opt for basic without ads are ad-sensitive enough to be persuaded to pay up. Although it’s a hefty price step, so maybe many will opt down into the ad tier.

Netflix management have suggested an ad ARPU of around USD$8.50 per month for its domestic ad tier, so assuming something similar in Canada (?), subs ARPU + ad ARPU would put this comfortably above the $9.99 ARPU of the ‘basic ex-ads’ tier. So, makes sense.

This is also an opportune time, given that the mere prospect of a crackdown on password sharing has seen a boon in subscriptions in the US. Antenna has tracked how in the days after Netflix announced its planned focus on password sharing on May 23, 2023,?Netflix has had the four single largest days of U.S. user acquisition in the four and a half years that Antenna has been measuring the streaming service.?

You can see from this Antenna graph the spike – Antenna assess it as?nearly 100,000?daily sign ups on both May 26 and May 27. Makes sense then, in Canada, to push this wave of new customers to the (possibly) $14.50 ARPU ad tier or the $16.49 non-ad tier, and not let them settle comfortably at a $9.99 tier.

So, very cursory glance at this suggests this (removal of the ‘basic, no ads’ tier) will be rolled out by Netflix to other ad-tier markets at a bit of a clip. ?