Netflix’s new ad-supported plan is already shaping up to be a dud

A Netflix logo is seen during the HOM temporary store opening to launch the new HOM Collection, the first line of home products for LGBT and families, as Netflix promotes the movie ' Il Filo Invisibile' on March 03, 2022 in Milan, Italy.
Image via Pier Marco Tacca/Getty Images

Earlier this year, Netflix announced the unthinkable with plans for an ad-supported subscription tier, ostensibly to retain or win back fleeing subscribers. But now that the new tier has launched, it appears to be too little, too late.

The new plan, Basic With Ads, costs just $6.99, 30 percent less than Netflix’s cheapest Basic ad-free plan at $9.99 per month for viewing on one supported device at a time. The streamer likewise offers a Standard plan at $15.49 per month for two supported devices, and Premium at $19.99 per month for up to four supported devices.

But according to Variety, citing analysis released this week by the research firm Antenna, after the plan launched on Nov. 3 it only accounted for approximately 9 percent of subscriber sign-ups in the U.S. — making it the least popular option.

And while there may be some growing pains with launching a new streaming product, Variety also points out that HBO Max endured less of a challenge when launching its own ad-supported option in June 2021. In the first month alone, 15 percent of the U.S. sign-ups were for HBO Max With Ads. And it continued to pick up steam, accounting for nearly nearly one-third of sign-ups in its first year. Today, roughly 21 percent of HBO Max subscribers are on the ad-supported plan.

But there are also some logical explanations for the slow start. Netflix does not currently have rights to serve advertising to approximately 10 to 15 percent of its titles, depending on market, including House of Cards, New Girl, and The Good Place. Also, the Basic With Ads tier does not allow for downloading titles for offline viewing.

Although Netflix has not yet provided its own sign-up data — with reported plans to share fourth-quarter 2022 results on Jan. 19. — the company claims for now that the Antenna data is inaccurate. A Netflix rep said in a statement,

“It’s still very early days for our ad-supported tier and we’re pleased with its launch and engagement, as well as the eagerness of advertisers to partner with Netflix.”

The company has not issued guidance on how many subs it expects to take the ad tier, but the company told investors that Netflix Basic With Ads will not represent a “material” contribution to Q4 earnings.

Be that as it may — adding to the streamer’s woes, Netflix stock prices dropped by 9 percent following the launch of the ad-supported subscription tier. Perhaps with heavier promotion, it will see an increase of Basic With Ads subscribers in 2023.