Nearly half of new Netflix signups are for its ad tier
It turns out a lot of people would rather save money than avoid ads.
Netflix’s ad tier is making up a growing share of its new signups. In places where you can get the $6.99 ad service, it accounted for 45% of new signups in the second quarter, up from 40% in Q1.
In May, Netflix told advertisers its ad-supported tier had amassed 40 million subscribers globally, nearly double what it was at the start of the year and accounting for 15% of all subscriptions. This quarter its ads tier grew 34% from last quarter.
That’s good news for Netflix, since ads are potentially worth more than the difference in subscription price. Netflix’s ad-free tier costs $15.49, or $8.50 more than ad tier per month. eMarketer estimates that Netflix earns $10 in monthly ad revenue per subscription.
“On a long enough timeline, the ad-supported tier is expected to generate higher average revenue per user (ARPU) than its ad-free compatriots as it amasses more cost-conscious users,” Parrot Analytics said in a statement ahead of Netflix’s earnings.
The situation is the same with other streamers, who are making their ad-free tier prices more attractive. Last month, for example, HBO raised the price of ad-free Max while keeping the ad subscription the same.
“Ads fulfill two important strategic priorities for Netflix: first they enable us to offer lower prices to consumers; and second, they create an additional revenue and profit stream for the business,” Netflix said in a press release.
