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Netflix’s Ad Tier Tops 23 Million Users as Consumers Rethink Streaming Spending

Netflix

As ad-free streaming becomes too expensive for many consumers, amid price hikes and broader economic challenges, Netflix is reportedly seeing surging adoption of its ad-supported tier.

Amy Reinhard, Netflix president of ads, said the plan’s monthly active user base has exceeded 23 million people globally, according to Variety. That’s up dramatically from the 15 million global active user count that the streaming giant cited at the start of November, an increase of more than 50%.

“We know there’s a lot of work to do on our side, but we’re all about learning and iterating and working with our advertising partners to figure out, ‘How do we grow this business in a meaningful way?’” Reinhard reportedly said at Variety’s Entertainment Summit at CES 2024.

The news comes as streaming services increasingly add ad-supported tiers to continue to boost their revenue while reaching consumers who will not or cannot spring for premium, ad-free tiers amid ongoing budgetary pressures.

Amazon Prime Video will introduce its ad breaks starting later this month, and Warner Bros. Discovery’s Max streaming subscription has seen its shift to ad-supported models contribute to revenue increases, even as subscriber counts have dipped. Plus, Paramount+ has been rolling out its ads tier around the world.

These moves come as consumers seek less expensive streaming options. According a study from 2022 highlighted in PYMNTS’ Subscription Commerce Tracker®, created in collaboration with Vindicia, 55% of consumers think there are too many streaming options, and 53% find it too expensive to pay for all the content.

In fact, when it comes to pricing, streaming services are on thin ice. The report “The One-Stop Bill Pay Playbook: Drivers of Consumers’ Bill Payment Priorities,” a PYMNTS Intelligence and Mastercard collaboration, which is based on responses from more than 2,100 U.S. consumers, revealed that 55% would cancel their streaming subscriptions if they were unable to pay all their bills, a greater share than would cut any other recurring bill.

Indeed, consumers are saying as much with their spending. Months ago, it was reported that Disney was encountering obstacles in meeting its Disney+ subscriber targets after raising its prices, and the service’s domestic subscriber growth has essentially flatlined in the past year, increasing only 0.1 million between September 2022 and September 2023.

Plus, a recent report revealed that streaming cancellations are on the rise, with the rate having grown to 6.3% in November, up from 5.1% the year before, and with roughly a quarter of U.S. subscribers to major streaming services have canceled at least three of them in the last two years.

Overall, many consumers hit unsubscribe when services become too pricey. Per the April 2023 installment of the “Subscription Commerce Readiness Report,” a PYMNTS Intelligence and sticky.io collaboration, cost is the most common reason for subscribers to cancel their services, with 56% of the more than 2,200 study participants having canceled a subscription in the previous 12 months for this reason.

With major players across the streaming industry adopting ad-supported models, the industry landscape continues to evolve to accommodate consumer preferences and challenging economic realities.