Netflix: With ads or without ads? That is the question.
The latest view from Netflix’s top 5 European markets.
Netflix’s introduction of a new ad-based subscription tier in October 2022 was the most dramatic strategy shift in years and it’s having a profound impact on their subscriber mix, as they also rethink their pricing strategy and review their legacy plans.
Why is Europe so important for Netflix?
EMEA is the largest segment of subscribers representing 34% of the total (up from 29% 5 years ago) and was the fastest growing region of 2023, adding 12.3m subscribers and with net subscriber growth more than double the second largest segment, UCAN, which added 5.8m subscribers.
Subscription price rises and new initiatives are often introduced in key markets first. In October 2023, Netflix launched a new ad-subscription plan in 12 markets (5 European), together with increasing legacy plan prices in UK, France and the US. Understanding customer elasticity and retention to these measures is key as they often follow in other markets.
The power of real-time pan-European transaction data is in revealing these trends on a per country basis, to show what’s driving the bigger picture. Below we take a look at the key differences between 5 of Netflix’s 12 largest subscriber markets covered by Fable’s data: UK, Germany, France, Italy and Spain.
But first, what do we need to know at the macro European level?
- Basic Ad plan subscribers have doubled in the last 6 months, now representing 12-26% across key European territories.
- Premium Plans subscriptions are subsequently waning, likely exacerbated by cost of living pressures and a crackdown on password sharing.
- Strong uptake of Basic Ad plans is seeing a steep decline in avg. price per month (of between 1-2 €/month), particularly in Germany, Italy and Spain.
- Netflix is using price rises as an offset; recent data from UK and France shows that a stable average price outcome is only possible with substantial rises.
- Legacy Basic (no ads) plans are due to be phased out from Q2’24 in the UK. Consumers will then have a choice: upgrade, downgrade or cancel. Recent trends suggest this is likely to accelerate growth in Basic Ad plan uptake.
What does Fable’s data reveal on a per country basis? UK, Germany and Italy as examples:
Netflix UK: The recent October 2023 price rises are offsetting average price declines from an increasing ad-tier subscriber mix which has grown to 14% of total subscribers. Another 14% of Netflix’s base who are currently on their Basic no-ads plan will be forced to select another option when this is discontinued in Q2 this year. The recent trend suggests consumers will be likely to trade down to a Basic with Ads plan. Whether this comes true and what impact this has on Netflix’s future pricing remains to be seen.
Netflix Germany: Ad tier subscribers represent 20% of total subscribers – one of the highest proportions across Europe. Unlike the UK, price rises are yet to come through to stem the decline in average price per plan, which has declined >1€ in the last 12 months.
Netflix Italy: In Italy over 40% of subscribers are on the Basic tier (with and without ads). The introduction of the ad tier has seen average pricing drop over 2.5€/month from a peak in early 2022.
Get in touch for access to the full insights including on Netflix France and Netflix Spain for the full picture.
How will consumers continue to react?
Fable will be monitoring closely as Netflix Basic (no ad) plans are removed from the offering in the UK, to see where consumers go next? Will they upgrade, downgrade or even cancel? Will we continue to see the shift towards cheaper Basic Ad plans? Will Netflix be forced to introduce more price rises as a result? Will other territories follow suit?
Fable Data’s Pan-European dataset has historically provided a strong read on Netflix’s average price per plan with >90% correlation and 1% error rate across EMEA. Recent trends from the first quarter of 2024 so far suggest further declines as consumers increasingly adopt Basic Ad plans at a rapid rate (slightly offset by price increases in UK and France).
Get in touch for access to the full insights and to find out more about Fable Data’s pan-European consumer spend data.
About Fable Data
Fable Data is an Award winning pioneer in the European real time consumer transaction data market. We own the most comprehensive anonymised dataset of European banking and credit card data, supplied directly from source and based on millions of European consumers. In addition to partnering with leading financial providers, Fable has a stellar client base of global Tier 1 Investors and Fortune 500 companies. We also work closely with central banks, institutions, and academics, to ensure that our ground breaking data and analysis are shared, at no cost, with global decision-makers.
Fable’s real-time view of the global economy informs better decision-making in business, government, research, and development.