Netflix scraps cheapest ad-free plan to boost ad-tier

(Reuters) – Netflix (NASDAQ:) has removed its basic plan in the U.S. and UK in which users could watch shows and movies without commercials, as the company tries to draw more subscribers to its ad-supported tier.

The company said on its website the $9.99-a-month basic plan would no longer be available for new or rejoining members. Users who are already on the plan could continue to remain on it until they change plans or cancel their account.

The streaming video pioneer had launched a $7-per-month option with commercials last November in 12 markets, including the U.S., as an alternative to ad-free plans. It was designed to attract more customers and add a new revenue stream as competition for online viewers intensified.

Netflix had also cracked down on households sharing passwords in May and forced users who share an account outside the same home to pay an additional fee, which in turn triggered droves of users to sign up for its cheaper ad-tier base.

“We expect the most important aspect of Netflix’s crackdown on password sharing will be the catalyst it creates to attract more users to its $6.99 ad tier base, in turn generating higher revenue from advertising,” Macquarie analysts said.

In May, the company said the ad-supported tier had reached nearly 5 million active users per month, in a pitch that emphasized the breadth of its programming to potential advertisers.

The company is scheduled to report its second-quarter results after markets today where investors will assess risks from the ongoing strike in Hollywood.