Rising popularity of Netflix’s ad-supported plan

Recent data reveals that Netflix’s ad-supported tier now constitutes 45% of new signups, a rise from 40% in the previous quarter. This increase shows that consumers prefer cost-saving options over an ad-free viewing experience.

As of the second quarter, Netflix has secured 40 million active subscribers globally on this tier, making up 15% of its total subscriber base.

The Netflix ad-supported model and its financial implication 

Netflix's ad-supported model offers lower-priced options with ads compared to ad-free plans. These subscriptions are priced at $6.99 monthly, significantly lower than the $15.49 ad-free tier. Netflix will benefit from the additional revenue from ads and the ability to offer lower subscription prices. Despite the lower price, Netflix generates approximately $10 in monthly ad revenue per ad-supported subscriber.  

According to Parrot Analytics, Netflix's ad-supported tier is expected to generate higher average revenue per user (ARPU) as it attracts a more cost-saving audience. 

Industry comparison

Like Netflix, various streaming platforms have adopted ad-supported plans in their subscription plans. For instance, Hulu’s ad-supported subscription costs $7.99/month while the plan without ads costs $17.99 monthly. 

Similarly, Max (formerly HBO Max) is adjusting its pricing strategies with its ad-free services becoming more expensive while ad-supported options remain stable. The Max ad-supported tier costs $9.99 per month for those who don't mind watching ads. At the same time, viewers who prefer an uninterrupted streaming experience without any advertisements will subscribe to the ad-free plan available for $16.99 per month.