"Survey Suggests Netflix Ad Plan May Have More Than 20 Million Subscribers In U.S." - Variety

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https://variety.com/vip/survey-netflix-ad-plan-20-million-us-subscribers-harrisx-1235983888/

 

  • Survey results show Netflix's ad tier is the second most popular of the service's four subscription plans in the U.S.
  • Extrapolation from those results suggests upward of 20 million ad-plan subscribers may exist in the domestic market
  • Why the ad tier still has room to grow, according to the survey, and what that means for Netflix's future

If the plan for Netflix's ad tier was to follow a "crawl, walk, run" progression, as the company's CFO once put it, the business now seems to be walking at a healthy clip.

Results from the latest quarterly streaming survey by HarrisX, shared exclusively with Variety Intelligence Platform, show that Netflix's ad-supported tier is, as of the end of Q1, the second most common subscription plan for the service among U.S. households of the four tiers Netflix offers. 

Out of more than 9,600 U.S. Netflix subscribers polled, 27% were on the "Standard with ads" plan, behind only the "Standard" plan — the cheapest ad-free tier currently on the domestic market — at 32%. 


These results suggest adoption of the ad plan has accelerated significantly since it launched to muted results about a year and a half ago. It's unclear how many users currently subscribe to the plan worldwide; Netflix has never revealed exact subscriber counts for the AVOD tier and has not disclosed any figures since announcing in January that it had surpassed 23 million global monthly active users. 

But based on rough extrapolation from these survey results, around 22 million users may now exist in the domestic market alone. Netflix had about 82.7 million subscribers in the U.S. and Canada at the end of Q1, per its earnings report for the quarter; 27% of that figure is about 22 million. 

There are caveats to this estimate, of course — the HarrisX survey covered only the U.S., not Canada, for instance — but it's not an unreasonable ballpark for the ad plan's domestic user base.  

The U.S., after all, is Netflix's largest single-country market, and "Standard with ads" is available in only 11 other countries worldwide: the U.K., Australia, Brazil, Canada, France, Germany, Italy, Japan, South Korea, Mexico and Spain.  

And if we assume the AVOD tier has maintained its November-to-January growth rate — the ad plan had 15 million monthly active users at its one-year anniversary last November — its global total would now stand at more than 30 million, or around 11% of Netflix's subscriber base. Not too shabby, considering the ads business is less than two years old. 

Its upward potential also remains significant. According to the HarrisX survey, as of Q1 nearly 20% of U.S. subscribers were still on the ad-free "Basic" plan, for which Netflix discontinued new subscriptions last summer. The streamer is already at work on eliminating that tier entirely in some markets, "starting with Canada and the U.K. in Q2 and taking it from there," as the company's Q4 '23 shareholder letter noted.

The question, of course, is how many users will be lost versus how many will migrate to the ad-supported plan once the Basic tier is eliminated. Given Netflix's success at converting many non-paying users through its password-sharing crackdown, however, it's logical to assume eliminating the Basic plan would be a net benefit for the company. 

Furthermore, Netflix's penetration in the U.S. remains lower than one might think, given the streamer's seeming omnipresence in the cultural landscape. While more than half of households subscribe to the service among every age bracket, penetration remains below 70% for all but one demographic — ages 25-29, per the HarrisX survey. 

 

The ad plan will be a key tool for further expansion, particularly as growth from the password-sharing crackdown begins to ebb. But while the crackdown has primarily been viewed as a short-term growth strategy, it could work in tandem with the AVOD tier as a long-term engine: As younger users exit their parents' households, for instance, they will be forced to begin paying for their own subscriptions and may find the ad-supported plan appealing as a low-cost option. 

In short, Netflix's push into ads is beginning to manifest the true potential it always possessed, despite its slow start. And of course that's good news for a business shifting from a high-growth model to a long-term, slow-growth one that will be increasingly reliant on ad revenues.

As the streamer reorients its focus to prioritize engagement rather than subscriber growth, advertising will only become more vital to its business model, with time spent on the AVOD tier driving revenue. If these survey results are any indication, user growth is more or less on rails at this point, and boosting engagement should indeed be priority number one.

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