As Netflix continues to dominate the streaming industry, speculation about potential price hikes has once again surfaced. The entertainment giant’s recent third-quarter earnings report for 2024 has reignited discussions about the company’s pricing strategy, leaving subscribers wondering if they’ll soon be paying more for their favorite shows and movies.
Netflix’s latest financial disclosure revealed an impressive addition of 5 million new customers in the third quarter of 2024. This growth, coupled with increased engagement levels, has industry analysts speculating about the possibility of a price increase. However, contrary to expectations, Netflix has not announced any immediate plans to raise subscription costs, Streamable reports.
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The company’s current pricing structure in the United States offers three tiers: an ad-supported plan at $6.99 per month, a Standard plan at $15.49, and a Premium plan at $22.99. According to Fox Business, the last price adjustment occurred in the fall of 2023, affecting the now-discontinued Basic plan and the Premium tier.
Despite the lack of a formal announcement, financial experts are closely monitoring the situation. Oppenheimer & Co. analyst Jason Helfstein anticipates “a Premium pricing increase for other regions, and more importantly an 8%-15% increase to the Standard plan,” the outlet reports. Helfstein points out that the Standard plan’s price has remained unchanged since January 2022, when it saw a $1.50 increase in the U.S.
The analyst also notes a significant shift in Netflix’s pricing relative to its competitors. “In Jan. 2022, NFLX Standard Plan was priced at 53% premium to peers; this is now 4%. Meanwhile, plans are 18%/9%/3% cheaper than Hulu/Max/Disney+ in the US,” Helfstein stated in an Oct. 9 research note.
Netflix’s co-CEO Greg Peters addressed the pricing question during the company’s earnings call, emphasizing their commitment to delivering value to subscribers. “Our core theory is, we’ve got to work really, really hard to make sure we are delivering more value to members every quarter,” Peters explained, per Streamable. He added that the company assesses its performance through metrics such as engagement, acquisition, and retention before considering price adjustments.
One factor potentially influencing Netflix’s pricing decisions is the recent crackdown on password sharing. The company has implemented what it calls “paid sharing,” allowing subscribers to add viewers outside their household for an additional fee. In the U.S., this “extra member” feature costs $7.99 per month.
Interestingly, the password-sharing restrictions have had a complex impact on viewer engagement. Netflix co-CEO Ted Sarandos acknowledged that paid sharing has reduced engagement in some households, as fewer people are sharing accounts. However, when isolating “owner households” – those with their own subscriptions – engagement has actually increased year-over-year in the first three quarters of 2024.
As stated in Netflix’s Q3 shareholder letter, “When you isolate owner households (which excludes the impact of paid sharing), view hours for those owner households rose year over year in the first three quarters of 2024,” Streamable reports.
This boost in engagement among account owners could be influencing Netflix’s decision to hold off on price increases for now. The company may be waiting for former password sharers to become more invested in the service before implementing any price hikes.
Netflix has, however, recently raised prices in other global markets. Peters mentioned price hikes in Europe, Scandinavia, and Japan, stating that the results have been “in line with expectations.” These international price adjustments could serve as a testing ground for potential changes in the U.S. market.
Macquarie US Equity Research senior media tech analyst Tim Nollen suggests that Netflix still has significant pricing power. “We think Netflix boasts strong pricing power given it has not raised price on the standard tier since Jan ’22 – Hulu and Max are now both more expensive than Netflix standard,” Nollen stated in a research note via Fox Business. He also highlighted that Netflix’s ad-supported tier, priced at $6.99, is currently the lowest-priced video streaming service, “illustrating its strong price to value arc.”
As Netflix continues to invest in content and expand its offerings, including ventures into live sports with NFL programming, the company must balance the need for revenue growth with subscriber retention. To stay competitive, Netflix will need to manage pricing expectations while maintaining its competitive edge.
