Netflix has implemented another round of price increases, with changes announced in its third-quarter earnings report. Specifically, the premium ad-free plan in the United States will see a $3 monthly increase, raising it to $22.99, effective from the upcoming Wednesday. Additionally, the one-stream basic plan will now cost $11.99 per month in the United States, while all other subscription tiers, including the entry-level $6.99-a-month ad-supported option, will maintain their current pricing. These alterations also extend to certain subscription tiers in the United Kingdom and France.
During the third quarter, Netflix displayed substantial growth, reporting a 9% year-over-year increase in average paid memberships and adding 8.8 million new subscribers. This significant surge is partly attributed to Netflix’s efforts in curbing password-sharing, as the company expanded its “paid sharing” program worldwide. The outcomes of this initiative revealed that rather than losing customers due to password sharing, many individuals who previously borrowed passwords have become full-paying subscribers. Additionally, Netflix reported a substantial uptick in the adoption of its advertising tier plans, experiencing almost a 70% increase in membership compared to the previous quarter. This strong subscriber growth drove the company’s revenue to $8.54 billion last quarter.
Despite the positive financial results, Netflix acknowledged challenges in the past six months, notably due to writers’ and actors’ guild strikes in the entertainment industry. On the earnings call, Netflix’s co-CEO Ted Sarandos expressed the company’s commitment to resolving the ongoing actors’ strike after an agreement was reached with the writers’ guild. The current stalemate in negotiations between SAG-AFTRA (representing Hollywood actors) and the studios has caused concerns, with Sarandos emphasizing the urgency of reaching a deal that respects all parties.
Netflix also highlighted its investments in newer business areas, including gaming and sports content, as strategies to attract new subscribers. The co-CEOs, Ted Sarandos and Greg Peters, believe that gaming, in particular, presents a significant entertainment opportunity and can be integrated into Netflix’s content offerings effectively.
Netflix’s recent price increase follows a similar move in January 2022 and is reflective of broader industry trends. Competing streaming services like Disney+ and HBO Max have also raised their prices in response to rising production costs and slower revenue growth, exacerbated by decreased demand for streaming services post-pandemic.
As one of the few profitable streaming services, Netflix continues to face investor pressure to grow its earnings. To address this, the company is exploring various pricing strategies, including expanding its lower-priced ad-supported tier while maintaining affordability for consumers and increasing advertising revenue over time. This approach aligns with Netflix’s intention to offer a more extensive range of price points for subscriptions to further expand its subscriber base in the future.
(Source: CNN | NPR)
