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· Posted on
February 21, 2024

Netflix sees a big jump in its cheaper tier subscribers despite initial (ad)versity

Nearly 20% of all Netflix's US subscribers have signed-up for its less costly subscription.

What's the key learning?

  • When Netflix launched its ad-supported tier, there wasn't a huge amount of fanfare... but now, nearly 20% of new US subscribers have signed up for it.
  • The biggest fear for Netflix and its investors was that its ad supported customers would cannibalise its existing offering - and for many existing customers to downgrade means less revenue for them.
  • Market cannibalisation happens when a company introduces a new product or pricing structure that displaces one of its existing products.

👉 Background: Netflix launched its ad-supported tier in November last year to.. not a huge amount of fanfare.

👉 What happened: Now, nearly 20% of all new U.S. subscribers have signed-up for the less costly subscription - but still behind Disney+.

👉 What else: The biggest fear for Netflix and its investors was that its ad supported customers would cannibalise its existing offering.

What's the key learning?

💡 Market cannibalisation happens when a company introduces a new product or pricing structure that displaces one of its existing products.

💡Experts were concerned that this new Netflix tier would cause many existing customers to downgrade… meaning less revenue for the Flux.

In November last year, which was launch month, 43% of their first ad-supported customers were downgraders from the premium plan.

💡But since then, most subscribers to Netflix's ad-supported tier are new users or lapsed users. So, the risk of cannibalising its existing pricing structure looks to have been saved!

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