In September 2021, Netflix launched a free plan in Kenya making it the first country in the world to offer such a service. The free plan allowed users to watch a limited selection of content on Android mobile phones without paying or providing payment information. The purpose of Netflix was to entice potential customers to its service and encourage them to upgrade to a paid subscription over time. Now Netflix has announced that it will end the free plan in Kenya on November 1, 2023, and cancel the memberships of those using it. Users who wanted to continue watching Netflix had to choose one of the paid plans, starting from Ksh 200 ($1.34) per month.
Netflix did not give a clear reason for ending the free plan, but it might have been a strategic move to focus on converting users into paying customers. With the discontinuation of the free plan, users will need to upgrade to one of Netflix’s paid plans if they wish to continue using the service. This could lead to an increase in the number of paid subscriptions, contributing to Netflix’s revenue in the region. This is not Netflix’s first attempt this year to convert its Kenyan users into paying customers. In February 2023, Netflix reduced its subscription prices in Kenya by an average of 37 per cent in February 2023, in response to increasing competition from other streaming services.
When it comes to investments, companies like Netflix carefully evaluate a range of factors. Netflix chose Kenya as a test market for its free plan because it faced some challenges in the African region, such as low internet penetration, high data costs, and strong competition from other streaming services. Kenya on the other hand, had 43.4 million internet users as of January 2022, which translates to an internet penetration rate of 82 per cent. The average internet connection speed in Kenya was 11.7 Mbps as of December 2021. Kenya is also the second leading mobile money economy in the world after China and has seen its economy grow exponentially since the introduction of the service over 15 years ago. However, maintaining a free plan can be costly for a company like Netflix, which has to pay for the content it streams.
The removal of the free plan might have different effects on Netflix’s market share and revenue in Kenya. One possible outcome is that Netflix might lose some users who are only interested in the free content or who cannot afford paid plans. This might reduce its market share and revenue in Kenya. Netflix did not disclose the exact number of users on the free plan in Kenya, but an estimate of over 500,000 is plausible given the popularity of the service. Moreover, the economic survey of 2023 shows that Kenya’s GDP growth decelerated from 7.6 per cent in 2021 to 4.8 per cent in 2022, partly due to adverse weather conditions that affected agricultural production, the main source of income for many Kenyans. This implies that some Kenyans have faced lower incomes and higher food prices, which affect their disposable income and savings, which Netflix services fall under.
Another possible outcome is that Netflix might face more competition from other streaming services that offer lower prices, more content, or better features. This might challenge its dominance and influence in Kenya. Showmax, one of Netflix’s competitors reduced its prices in Kenya by an average of 37 percent in February. Amazon Prime Video, another one of Netflix’s competitors offered a 50 per cent discount for students who signed up with a valid academic email address. According to a report by the Media Council of Kenya, free-to-air digital terrestrial TV is the most popular platform in Kenya. Regardless, Netflix’s move to end free data in Kenya couldn’t have come at a more significant time. Kenya is a largely cashless economy. Mobile money accounts keep growing every month. Kenya’s mobile money market has grown to $109.9bn as of 2022 and is projected to reach $348bn by 2028. The Central Bank of Kenya also recently raised mobile money transaction limits. The shift from a free to a paid Netflix service could lead to an increase in digital transactions, further boosting this trend.