When cheap isn’t enough: Netflix discusses free plans in certain markets

Netflix’s plans with ads are cheaper, but they still do not attract enough new subscribers. That’s why the streaming giant is reportedly looking to introduce free tiers in European and Asian markets.

Sure, Netflix really is the largest streaming service out there (besides YouTube), and others are rushing to license their shows and movies to it. But, the platform is also barely in the top 10 when it comes to online video advertising revenue.

For a company that introduced cheap plans with ads already 20 months ago, being behind players like Disney, Fox, or Roku really doesn’t look good.

Netflix’s ad-supported plan now has 40 million global monthly active users – up from 5 million a year ago, and over 40% of all sign-ups in countries where such tiers are available now come from the ads plan. But that’s not good enough for Netflix, it seems.

Bloomberg is now reporting that the streamer has discussed creating free ad-supported plans in some countries in Europe and Asia as a way to grow its audience. Countries with popular free TV networks such as Germany or Japan are especially interesting to Netflix.

According to Bloomberg’s sources, a free service would help Netflix reach more people who can’t afford it or don’t have a good way to pay for it.

Most importantly, a free tier would help the streamer to create more advertising inventory. One advertising executive told Bloomberg: “They’ve been slow to scale. It’s not the most attractive place. There is not a clamoring for them.”

As mentioned above, the growth in subscriptions to the ad-based plan has been remarkable. But, actually, Netflix didn’t deliver as many impressions, so important for advertisers, as it said it would – naturally, ad buyers are concerned they aren’t getting enough viewers for their commercials.

In the United States, Netflix’s ad-based tier is a fraction of the size of Peacock, Hulu, Disney+, and Amazon Prime – both in terms of sales and viewers.

Netflix’s cautious strategy didn’t help – they allowed customers to choose what they want themselves where, for instance, Amazon and Disney simply turned ads for all viewers and told them they needed to pay more to avoid commercials.

At least in the case of Amazon Prime Video, the maneuver delivered a large audience immediately. The vast majority of Prime Video viewers (75%) are now watching with ads, industry executives told Bloomberg.

Besides, Amazon charges advertisers lower rates, undercutting the competition. This is bad news for Netflix, a platform that spent years pitching itself as TV without ads and is only now gaining experience selling ads.