Netflix Looks to Scale Ad Tier, Automatically Enrolls Basic Plan Users Into Ads Plan

When Netflix debuted its ad-supported tier in 2022, users were not automatically enrolled in the plan. Now, around two years later, the streamer is making some changes.

In July, Netflix announced it was eliminating its cheapest ad-free tier, the Basic plan, in the United States and France—and some Netflix subscribers shared on Reddit and X (formerly Twitter) that they are now receiving emails about being automatically enrolled into an ad-supported plan.

“Your Basic plan is being discontinued, and your new $6.99 Standard with ads plan automatically begins on your next billing date,” a customer email from Netflix on Aug. 5, 2024, obtained by ADWEEK, reads. 

Though users can upgrade to an ad-free plan on their own for additional costs, they will be automatically subscribed to the $6.99 Standard with ads plan if they take no action, depending on when their billing cycle takes place. The Standard reported in May that Netflix was making similar moves in automatically enrolling Brits who formerly subscribed to the Basic plan to ad tiers.

The email also included a bulleted list of what users can expect from the ad-supported plan, including a lower price, better video quality, the opportunity to watch and download videos on two household devices at the same time, and a few short ads that promise to “not interrupt you during a scene,” as well as no ads on Kids profiles. 

According to a Netflix representative, automatically enrolling users in the ads plan isn’t a change in strategy, but rather a move to put customers in its lower-priced plan following the Basic plan being discontinued.

Experts noted that Netflix moving its users to its ad tier could prove fruitful quickly.

“For advertising to become a driver of revenue growth for the company, Netflix must demonstrate a fertile addressable audience to lure big brand ad dollars,” Mike Proulx, vice president and research director at Forrester, told ADWEEK. “Netflix shuttering its Basic plan and, effectively, forcing those subscribers into its ad-based plan will no doubt douse it with accelerant.”

The strategy is more of a modified version of Amazon’s Prime Video ad tier rollout, which automatically enrolled all of its users when its ad tier debuted in January, immediately giving advertisers scale.

At its TV upfront presentation in May, Netflix reported that it had 40 million monthly active ad tier users. However, buyers recently told ADWEEK that scale is still Netflix’s biggest hurdle for its ad tier, so a shift to add users makes sense.

“Netflix doesn’t use bundles much, but when they do, they do it to grow the advertising audience,” Ross Benes, a senior analyst with eMarketer, said. “Pushing people from obsolete plans onto ad plans would be another tactic that accomplished the same goal. That is less aggressive though than doing what Prime Video did in defaulting all viewers onto the ad tier.”

Though some consumers may initially cry foul at the Netflix change, they’re unlikely to cancel their subscriptions, according to Proulx, who added that Forrester’s research shows that consumers are willing to tolerate ads on streaming if it means not having to pay higher prices.

“The cost difference between Netflix’s ad tier and its standard no-ads tier is $8.50 per month,” Prolux said. “That adds up quickly.”

In reality, any negative feedback may be short-lived.

“Any protest would be minor,” Benes said. “There are constant ‘boycotts’ of Netflix and others over content, pricing, etc. — that has little to no effect on Netflix’s audience size or the streaming market. Viewers will complain more than they will cancel.”