Netflix told investors it has added millions of new customers and has lots of room to grow its revenue — with part of that growth coming from the planned elimination of the cheapest, ad-free plan available to Canadians.
According to fourth quarter results, released late Tuesday afternoon, Netflix is planning to “retire” what it refers to as its Basic plan in Canada and the United Kingdom starting in April 2024.
The Basic, zero-ad plan cost $9.99 per month, a price that existing customers of that plan could continue to pay as long as they did not change their account.
New subscribers, as well as existing Netflix subscribers who wanted to switch plans, have been unable to choose that plan since June 2023.
Netflix would not confirm the exact date that existing customers will be cut off. It referred CBC News to a letter published for investors as part of the company’s quarterly results, which says the action will start during its second quarter.
Back in June 2023 when Netflix announced it was cutting off the cheapest ad-free plan to new clients, the company told The Canadian Press that existing customers would eventually be cut off from the Basic plan.
Those subscribers will choose between a cheaper, $5.99 per month plan that includes advertisements, or one of its an advertisement-free plans, which start at $16.49 monthly.
Revenue is up. So are advertisements
News about the plan’s demise came as part of the company’s year-end announcement that its revenue in the last three months of 2023 was up by 12 per cent compared to the year before.
Investors were also told that plans featuring advertisements now account for 40 per cent of all Netflix sign-ups in markets that offer the advertisement-included plans. The company also said it plans to improve how it targets ads to viewers.
These investor announcements come as competitor Amazon Prime Video is set to roll out mandatory advertisements on its streaming platform. Canadian viewers will have to pay an extra $2.99 per month if they want to opt out of ads on that service.
Investors seem to like what they see
Netflix’s stock price rose on Wednesday as its subscriber growth appeared to cement investor confidence the firm has won the streaming wars with its crackdowns on password-sharing and a strong content slate.
The company said on Tuesday that 13.1 million people signed up for its service in the fourth quarter, marking its best growth since the start of the pandemic and handily beating estimates of 8.97 million subscribers.
“Netflix has already won the streaming wars and this type of strong result … especially relative to its streaming peers, is what winning looks like,” said Pivotal Research Group analyst Jeffrey Wlodarczak, who raised his estimated target for Netflix’s stock price.
The company’s stock commands a premium relative to rivals, and some analysts believe the higher valuation could be justified as the ongoing push for profitability at other streaming firms will force them to license more titles to Netflix, which may help Netflix drive up subscriber growth and average revenue per user.
The firm highlighted strong demand for licensed titles such as Young Sheldon in its earnings call on Tuesday. Its slate of shows in the fourth quarter also included the final season of the The Crown and David Fincher’s film The Killer
The company plans to spend as much as $17 billion US on content this year, after last year’s dual Hollywood strikes by actors and writers disrupted some productions.
Netflix is also ramping up its bets on live programming and unveiled a more than $5 billion US rights deal on Tuesday to bring World Wrestling Entertainment’s Raw and some other programming exclusively to its service in January 2025.