Netflix’s ad-supported plan is getting some upgrades that may make it more appealing to users.
The company today revealed that its $6.99-per-month plan will soon show videos at 1080p quality, an improvement over the current 720p resolution. In addition, subscribers to the ad-supported plan will be able to stream on two devices concurrently, up from one.
Netflix plans on rolling out the upgrade to all 12 markets the ad-based tier is currently available in, which includes the US. The changes haven’t arrived for the US market yet, but users in Canada and Spain can enjoy the upgrade today.
“We believe these enhancements will make our offering even more attractive to a broader set of consumers and further strengthen engagement for existing and new subscribers to the ads plan,” Netflix wrote in a letter to investors.
The company launched the ad-based tier in November. But despite an underwhelming reception at first, the ad-supported plan has been gaining strong momentum from consumers, Netflix reports. “Engagement on our ads tier is above our initial expectations and, as expected, we’ve seen very little switching from our standard and premium plans,” the company wrote in the letter.
Surprisingly, Netflix reports it’s generating a higher "Average Revenue per Membership" in the US through the ad-based tier than via the company’s “Standard” plan, which costs $15.49 a month. That’s because the ad-based plan can draw sales from both the $6.99-per-month fee and additional revenue through the commercials. (In 2019, The New York Times reported Hulu's own ad-based plan generated $15 per month for every user on the $6-a-month plan.)
However, one limitation to Netflix's ad-based plan is how it can lock away some content due to licensing issues. But on Tuesday, the company reported progress in removing the restrictions. “Thanks to our most recent set of licensing deals, our ad-supported plan now has on average ~95% content parity globally (by viewing) with our ads-free plans, including all the latest Netflix shows and movies,” it said.
The ad-supported plan will also try to attract subscribers when Netflix is preparing to broadly crack down on password sharing this quarter across major markets including the US.