In a move that is set to impact millions of subscribers, Netflix announced on Thursday that it will begin phasing out its Basic plan, its cheapest and most affordable option that costs $11.99 per month in the United States.
The company had previously stopped accepting new sign-ups for the Basic plan, instead pushing customers to its ad-supported plan, which costs $6.99 per month.
However, existing users were allowed to keep the basic plan. But now, Basic users in the US will have to choose between upgrading to the Standard plan, which costs $15.49 per month, or the Premium plan, which costs $22.99 per month.
The move comes as Netflix reported a record-high 277.65 million subscribers on its platform, surpassing its streaming competitors such as Disney+, Peacock, and HBO Max.
The company added 8.05 million new subscribers in its second quarter, driven in part by its effort to crack down on password sharing.
However, Netflix expects the pace of its subscriber additions to slow down in the third quarter.
The company’s stock fell nearly 2% in after-hours trading on Thursday but has climbed over 35% this year.
The move away from the Basic plan is not unique to the US, as Netflix has already retired its cheapest ad-free tier in Canada and the UK.
The company has also been pushing further into live sports programming and experiences and has started to explore advertising as a new revenue stream.
Netflix’s shift towards more expensive plans could be a blow to customers who are looking for an affordable streaming option.
But the company’s efforts to increase revenue may be necessary as it faces increasing competition in the streaming market.
NETFLIX’S NEW FOCUS ON ADVERTISING
In addition to phasing out its Basic plan, Netflix is also shifting its focus towards advertising as a new revenue stream.
The company reported a 34% jump in sign-ups for its cheapest ad-supported tier, its “Standard with ads” plan, in the second quarter.
Netflix’s move into advertising is a significant shift for a company that was once known for being an ad-free platform.
However, with the rise of streaming services like Hulu and Peacock offering ad-supported options, Netflix may see advertising as a way to differentiate itself and attract more customers.
