Netflix’s 3-pronged strategy is working, like it or not

Not all that long ago, the idea of having to sit through commercials while chilling with Netflix was, well, unthinkable, right?  

Meanwhile, Netflix’s subscription plans were far cheaper than ponying up for HBO or Showtime, and if you wanted to share your password with a buddy, well… big deal. 

Netflix seemed pleased with the state of things, too—after all, people kept signing up, quarter after quarter.  

That changed in the early months of 2022: people stopped signing up. 

That’s an exaggeration, of course; millions of users still were signing up for Netflix. But millions more were cancelling, too, and for the first time in a decade, Netflix’s subscriber growth was in the red. 

Everyone has a plan until… well, you know the saying, and Netflix had just taken one on the kisser. The company decided it was time for a new plan. 

For its first 20 years, Netflix executives delighted in thumbing their noses at convention.  

First, there were no late fees; keep those DVDs are long as you want! Then there were all-you-can-eat streaming videos. And sharing passwords? Well, Netflix execs didn’t exactly condone it, but they didn’t actively discourage it, either—after all, every password sharer was one more person watching Netflix, right? 

Through it all, Netflix kept a lid on prices, with its priciest Premium plan (the one with four UHD streams) only breaking the $15-a-month barrier in January 2019. In that same month, you could nab a bare-bones but ad-free Basic plan for just $8.99. 

It was all going so well for Netflix, but then the iceberg came: a shockingly bad Q1 2022 earnings report that left Netflix reeling. 

Determined to avoid a Titanic-style fate, Netflix’s C-suite embarked on a three-pronged plan that involved a trio of abrupt—and unpopular—about-faces. 

First, Netflix reversed course on a key issue: ads. After having pooh-poohed the idea just months before, Netflix announced in April 2022 that it would “explore” an ad-supported tier, and it launched one astonishingly quickly, bowing Basic with Ads (later renamed Standard with Ads) in October 2022. 

Next up? Putting the kibosh on password sharing, with Netflix rolling out tools allowing members to spin off the profiles of freeloading streamers into their own separate accounts, while also allowing users to buy cheaper “sub accounts” that essentially let you pay for those who used to share your account for free. 

Finally, price hikes. By January 2022, the price of Netflix’s 4K premium plan was already $19.99 a month, but Netflix lowered the boom yet again, upping its premium plan to $22.99/month. At the same time, it began phasing out its cheapest ad-free plan, Basic, leaving the $15.49/month Standard plan as the most affordable way to stream Netflix without ads—a de facto price hike. 

Of course, all three of these measures were greeted with howls of protest, as Netflix seemed to be turning into the very thing its most loyal subscribers loathed: big cable. 

Here’s the thing: like it or not, Netflix’s three-headed hydra of ads, price hikes, and password-sharing clampdowns is working.

On Tuesday, Netflix released a glowing fourth-quarter 2024 report that detailed a gain of 13.1 million net subscribers, better than Wall Street had been expecting. 

So, here’s the new state of Netflix, a stark contrast with the old Netflix:

• Netflix with ads is here to stay, and now you can even download videos on the Standard with Ads plan, a first for the streaming market.
• Next, more price hikes are on the table (they always are), while the old and cheaper Basic plan will be put out to pasture (as least in markets where “with ads” Netflix is available),
• Finally, the password-sharing crackdown isn’t going anywhere–indeed, Netflix’s competitors are copying it.

After all, when a plan is working, you do more of it.