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Netflix Considers Price Hikes Again Following Crackdown on Password-Sharing
Updated: Jan 8
Netflix's recent crackdown on password-sharing has proven successful, boosting its subscriber base by approximately 6 million in the third quarter.
As a result, the streaming giant is now contemplating raising prices again, a move that is expected to be announced during its upcoming earnings report.
Unlike its competitors, such as Walt Disney, Netflix has refrained from increasing ad-free subscription prices this year. Instead, the company focused on curbing password-sharing outside of households, targeting the vast number of viewers who use its service without subscribing. Analysts at Bernstein have noted that Netflix now resembles a utility in many markets, and the challenge lies in sustaining growth as a maturing company.
Reports suggest that Netflix may implement price hikes after the conclusion of the Hollywood actors strike, which occurred earlier this month. Despite the strike causing turmoil in the industry, Netflix managed to weather the storm due to its strong international presence and compelling content lineup.
Analysts anticipate that Netflix will raise prices for its ad-free options in the coming months to encourage more subscribers to opt for the tier that includes commercials. This move would generate higher revenue per user. Since the password crackdown, most new subscribers have chosen the ad-free plans. The standard plan with ads currently costs $6.99 per month, while the ad-free plans start at $15.49.
Insider Intelligence analyst Ross Benes predicts that Netflix will likely double its ad-supported viewership next year by employing these tactics. He also expects the company to gradually increase the number of ads shown to users, catching up with its competitors.
According to estimates from Visible Alpha, the ad tier is projected to generate approximately $188.1 million in revenue in the third quarter, with an addition of 2.8 million subscribers.
Wall Street analysts anticipate that Netflix will report its strongest quarterly subscriber additions this year. Revenue for the third quarter is expected to have risen by 7.7% to $8.54 billion, marking the fastest growth in five quarters. This growth can be attributed to the success of popular programming, including the latest seasons of "Sex Education" and "Virgin River."
Netflix's crackdown on password-sharing led to a boost of approximately 6 million subscribers in Q3.
The company is expected to announce price increases during its upcoming earnings report.
Netflix may raise prices for its ad-free options to encourage more subscribers to opt for the tier with commercials.
Source: REUTERS