Netflix formally introduced its highly anticipated ad-supported tier Thursday, but it might disappoint many current paid users who might otherwise be willing to put up with commercials in exchange for a significant price break.
Netflix is offering one ad-supported tier, "Basic with Ads," priced at $6.99, $3 cheaper than its "Basic" paid tier, which is similar in features. That will certainly appeal to many younger, single users who are on a budget.
But users with spouses/significant others and families looking to save coin might find the concessions of Basic with Ads too much to bear.
This starts with the number of users who can stream the service simultaneously -- both of Netflix's Basic tiers allow for just one user, while the $15.49-a-month "Standard" plan allows for two streamers, and the $19.99 "Premium" tier enables four simultaneous streamers.
Then there's resolution.
Both of Netflix's Basic plans now allow for 720p streaming, the basic threshold for HD video ... and an upgrade from the previous product configuration, in which the legacy paid Basic tier offered only 480p "standard" resolution.
Users who want real 1080p HD video will still have to pay $15.49 a month for Standard. And if they want to see Netflix's limited 4K catalog in the Ultra HD resolution in which it was intended, they'll need to spring for the Full Monty, Premium.
Meanwhile, Basic with Ads lacks things that even the paid Basic has. For one, due to rights issues that are still being hammered out by Netflix, Basic with Ads won't have access to as much as 10% of Netflix content, depending on the region.
Also, paid Basic lets users download movies and shows to up to one device (it's two for Standard and four for Premium).
Basic with Ads users get no soup in terms of offline viewing.
As detailed by Bloomberg Thursday, Netflix has all the data it needs, and its top-level executives seem to understand the dynamics currently limiting the company's growth. Netflix knows who its more price-sensitive consumers are, and it designed its new go-to-market strategy to target them specifically.
In other words, Netflix smartly doesn't want to incentivize less price-sensitive consumers to downgrade their service.
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Daniel Frankel is the managing editor of Next TV, an internet publishing vertical focused on the business of video streaming. A Los Angeles-based writer and editor who has covered the media and technology industries for more than two decades, Daniel has worked on staff for publications including E! Online, Electronic Media, Mediaweek, Variety, paidContent and GigaOm. You can start living a healthier life with greater wealth and prosperity by following Daniel on Twitter today!