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Netflix pivots to cheapest ad-free plan and looks at impact of Hollywood strike on content Business news

Netflix has removed its cheapest monthly plan for subscribers to watch without ads in the US and UK, it has been revealed.

The move, which only affects new users, came shortly before the latest Netflix Financial results that showed steady revenue and revenue growth but projected a decline in material costs, partly due to the impact of industry strikes.

The total addition of 5.9 million new users beat Wall Street expectations of 1.9 million for the three months to the end of June.

It emerged earlier in the day that its basic £7-a-month ad-free plan will no longer be available to new subscribers.

This is part of the streaming video platform’s efforts to attract more users to its ad-supported and higher-priced tiers to increase revenue in an increasingly crowded market, particularly in the US.

The company, which launched a cheaper tier with ads late last year, later implemented a crackdown on password-sharing households.

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It insisted that users who were already on the basic ad-free plan could stay as long as they changed plans or canceled their account.

The decision leaves Netflix with three key pricing plans at a time when household budgets are under pressure from the effects of inflation on both sides of the Atlantic.

The second-quarter results statement forecast third-quarter revenue to reach $8.5bn – just shy of analysts’ forecasts.

The March-June figure was $8.2 billion — down just under 3 percent.

Market experts suggested that Netflix, unlike many of its US rivals, would be less likely to be affected by strikes involving tens of thousands of actors and writers in Hollywood.

Writers Guild of America members and supporters picket outside Sunset Bronson Studios and Netflix Studios, as union negotiators call for a strike for film and television writers, in Los Angeles, California, US, May 3, 2023.  REUTERS/Mario Anzuoni
Members of the Writers Guild of America protest outside Sunset Bronson Studios and Netflix Studios in May.

This has been put on its global production footprint which includes major studio space in the UK.

However, the company added in a letter to shareholders: “We now expect FCF (free cash flow) of at least $5bn for 2023, up from our earlier estimate of at least $3.5bn.

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“Our updated expectation reflects lower cash material costs in 2023 than we originally estimated at the time of production and due to the ongoing WGA and SAG-AFTRA strikes.”

The letter added: “While we have made steady progress this year, we have more work to do to re-accelerate our growth.”

It committed to “creating a steady drumbeat of must-watch shows and movies; improving monetization; enjoying our games; and investing in improving our service for members.”

Shares fell more than 3 percent in extended trading.

Source by [Sky News]



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