Netflix’s ad-supported option is becoming key to its business, perhaps signaling a shift to a new business model.
Netflix is phasing out its cheapest ad-free plan in Canada and the U.K., with plans to do the same in the U.S. and France. Netflix added eight million global subscribers in Q2, with its ad-supported plan gaining significant traction.
The lower-priced tier now accounts for over 45% of new signups in markets where it’s available, signaling a potential shift in Netflix’s business model. The company is also testing pause ads, which appear when viewers pause content.
Netflix reported strong Q2 2024 results, surpassing projections with significant growth in revenue, profits, and subscribers.
- Revenue: $ 9.56 billion (up 17% YoY)
- Net income: $ 2.15 billion (up 44% YoY)
- Global subscribers: 277.65 million (up 16.5% YoY)
“Our ad revenue is growing nicely and is becoming a more meaningful contributor to our business,” Netflix stated in its earnings report. Starting next year, Netflix will change how it reports growth, focusing on revenue by region instead of subscriber numbers. The company warns of slower subscriber growth in Q3 2024 as the impact of paid sharing diminishes.
This shift “reflects the evolution of the business” as Netflix prioritizes advertising and subscriber retention.
Why we care. A higher proportion of subscribers are moving to the ad-supported tier, increasing the available ad inventory and creating more opportunities for advertisers to reach a broader audience.
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