After a slow start since its launch last November, around 1 million accounts are thought to be subscribed to Netflix’s ad-supported tier in the United States, according to internal figures seen by Bloomberg. Apparently, the user base grew by more than 500% in the first month from its launch and another 50% in its second month.
Netflix launched its “Basic with Ads” plan in order to give price-conscious consumers an alternative. While a lot of people pay for Netflix – 231 million as of the end of last year –, the service is still expensive for many people. In fact, the company has effectively doubled the price of its main plan over the last decade.
While analysts feared this new tier would cause many existing customers to downgrade, Netflix did not think this would happen. In fact, most of the people signing up for the ad tier are new customers or lapsed customers, not people who immediately changed plans. The ad tier now accounts for about 20% of new sign-ups in the United States, according to Antenna.
What it is unknown is how many people have signed up for the ad tier, and whether it has boosted the total number of subscribers for the company. The 1 million monthly active users includes multiple people using one account, and that is only in the United States. Netflix already has 74 million customers in the United States, which means it does not have that many potential new viewers. Analysts estimate the ad tier could bring in between 15 million and 30 million customers in the country, although that will not be right away.
Furthermore, according to Bloomberg’s Lucas Shaw, the effectiveness of the ad tier is about to get a major test as Netflix cracks down on password sharing. That move will force millions of people to stop using their friends’ accounts, at which point they can either quit Netflix or pay. Obviously, for price-sensitive consumers, the US$7 version of Netflix is a lot more appealing than the US$15 or US$20 version.