Netflix raises the prices for some of its subscription plans, despite its recent success in cracking down on password sharing. The streaming giant announced that the monthly charges for its basic service in the UK will go up by £1 to £7.99, and the premium option will see a £2 increase to £17.99. In the US, the premium plan will now cost $3 more per month at $22.99 (£19.00), and in France, premium subscribers will pay an extra €2 at €19.99 (£17.40).
As Netflix raises prices , it reflects Netflix’s growing confidence, which has been bolstered by the addition of 8.8 million subscribers between July and September, marking the most significant increase in more than two years. However, Netflix has been facing doubts about its ability to continue attracting new members due to increasing competition, rising prices, and delays in new releases caused by a Hollywood strike.
In the first half of the previous year, Netflix lost around one million subscribers, raising concerns. Much of the subscriber growth in the latest quarter came from the introduction of an extra fee, which is slightly less than half the cost of its “standard” ad-free plan, allowing multiple households to share the same account. Additionally, the launch of a more affordable plan with advertisements accounted for about 30% of sign-ups in countries where it was available.
Netflix appears to be maximizing its revenue potential from its existing subscriber base, and as the competition intensifies, the success of its next growth phase becomes increasingly vital. The company believes it has the right mix of original content and licensed favorites to retain its audience, with series like “Suits” highlighted as a successful example. Netflix also mentioned its intention to explore more opportunities to license hit shows as the competitive landscape evolves.
While Netflix has focused on producing its content in recent years, analysts believe that licensed content will become more critical, especially as audiences feel the impact of the Hollywood strikes that disrupted new productions for several months. Although writers recently reached a deal, the actors guild and major studios, including Netflix, are still negotiating compensation and artificial intelligence-related issues.
Investors have grown skeptical of the significant losses reported by some of Netflix’s streaming rivals, such as Disney, which puts Netflix in a strong position. In its quarterly update to investors, Netflix reported a 7.8% year-on-year increase in quarterly revenue, reaching $8.5 billion, with profits reaching $1.67 billion.
Netflix has been pushing its customers to consider the advertising-funded plan, which it sees as having substantial profit potential. This motivation is one reason for the price increase for its “basic” ad-free plan, which is no longer prominently promoted on its website.
Looking ahead, customers should expect even higher prices in the coming years as Netflix seeks to protect its profits and manage the costs of licensing and new initiatives. The company recently revealed plans to open a select number of physical destinations for shopping, dining, and Netflix “experiences,” similar to a Netflix version of Disney World.
As a result of this news, Netflix shares surged by more than 10% in after-hours trading.