Netflix Announces Price Increase Amidst Strong Subscriber Growth
Netflix, the popular streaming service, has announced another price hike. Starting Wednesday, the premium ad-free plan in the U.S. will cost $22.99 per month, marking a $3 increase. The basic one-stream plan will also see a rise, now priced at $11.99. However, the entry-level ad-supported tier remains unchanged at $6.99. Price adjustments will also affect certain subscription tiers in the UK and France.
Despite the price changes, Netflix reported a robust 9% year-over-year growth in average paid memberships, with an addition of 8.8 million subscribers in the last quarter. This growth is significant when compared to the 2.4 million subscribers added in the same period the previous year. The company now boasts 247 million global subscribers.
One factor contributing to this growth is Netflix's crackdown on password sharing. The company's "paid sharing" program, now available globally, has led to fewer cancellations than anticipated. Instead, many users who once borrowed passwords are now becoming full-fledged subscribers.
The ad-supported membership tier has also seen substantial growth, with a 70% increase in memberships compared to the previous quarter. This growth contributed to the company's impressive $8.54 billion revenue for the last quarter, resulting in an earnings per share of $3.73. Following the announcement, Netflix's stock surged by 12% in after-hours trading.
However, the past six months have been described as "challenging" by Netflix, particularly due to strikes by writers and actors. Ted Sarandos, co-CEO of Netflix, emphasized the company's commitment to resolving the actors' strike, following a recent agreement with the writers' guild.
The co-CEOs also highlighted Netflix's ventures into new sectors, such as gaming and sports content, aiming to attract more subscribers. Greg Peters, co-CEO, expressed optimism about the potential of gaming, envisioning it as a strong content category that complements their existing films and series.
Netflix's decision to raise prices follows similar moves by competitors. Disney+ increased its prices twice this year, and Warner Bros. Discovery's Max also introduced a price hike earlier in 2023. As production costs soar and the demand for streaming services plateaus post-pandemic, price hikes appear to be a strategy to maintain revenue growth.
The recent writers' strike, which resulted in better pay and benefits for Hollywood writers, indicates that production costs will continue to rise. The ongoing actors' strike further underscores this trend.
Despite these challenges, Netflix remains one of the few profitable streaming platforms. To meet investor expectations and continue earnings growth, the company is promoting its lower-priced ad tier. This strategy allows Netflix to offer competitive prices to consumers while increasing revenue from advertisers.
In the future, Netflix plans to introduce a broader range of subscription prices, aiming to cater to a global audience with varying entertainment needs and budgets.