Can Netflix be free?

May 3, 2023
< 1 minute

By Sorin Anagnoste

Strategy | Business Models | Tech

Can Netflix be free?

Source: Netflix

The company now makes more revenue per user from the ad-tier ($6.99/month) plan than the Standard plan ($15.49/month). (soon will come to Europe, probably to Spain)

There are several takeaways:
1/ Netflix changed the name of the plan from “Basics with ads” (1 device, no full HD) to “Standard with ads.” In this process, they added 2 supported devices with full HD. This makes this product very compelling.

2/ Will they cannibalize other streams? Yes, of course. Because you want to have more people on this tier because you can do a better targeting

3/ Ads open the door to multiple new staff. They are expanding their addressable market. By the way, 100m heavy users are watching it by sharing passwords (i.e. illegally)

4/ More people, more money. So, the ads system on Netflix runs the same as the other Social Media platforms: companies (advertisers) are bidding for the ad space. (4 minutes/hour). So, the more people are on this ad tier, the more expensive the ads become, hence more revenue per user for Netflix.

So, answering the initial question: Yes, of course! Not only that the company will make more money from ads, but they can decrease the price or even make it zero.

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