Netflix subscribers should brace themselves for a potential increase in its subscription costs in the near future.
Analysts are predicting a price hike for the streaming giant’s services later this year as part of a pattern of periodic rate adjustments by the streaming platform, all aimed at bolstering its revenue and earnings growth amidst the competitive landscape of digital streaming services.
As per Variety, analysts from UBS Securities, led by John Hodulik, have forecasted that Netflix will implement rate increases within the year to accelerate its revenue growth. This prediction suggests a significant revenue jump from 7% in 2023 to an estimated 15% this year. While potentially beneficial for Netflix’s shareholders, presents a less appealing prospect for subscribers, who may have to adjust their budgets to accommodate the higher costs.
The prospect of another rate hike might surprise some considering that the last price adjustment occurred last October. During that round, the basic plan’s cost rose to $11.99 per month from $9.99, and the premium plan saw an increase to $22.99 monthly. These adjustments marked a 15% increase from the previous rates, affecting subscribers in the U.S. and other regions, including the U.K., France, and Australia.
Despite the pushback, Netflix’s leadership have shown optimism about the reception of its past pricing strategies. The company’s co-CEO Greg Peters mentioned in an investor call that the previous price hikes were well-received, exceeding the company’s forecasts. This is likely the reason why Netflix is brazen enough to pursue further increases soon after a crackdown on password-sharing. Peters even described the crackdown as one form of an increase, which temporarily paused further rate adjustments. However, with the completion of this initiative, Netflix is returning to its “standard approach towards price increases.”
As traditional media companies recalibrate strategies to emphasize profitability over its subscriber growth, Netflix’s expansive library and entrenched subscriber base afford it a unique advantage. This positions Netflix to potentially raise prices while maintaining or even growing its subscriber numbers.
However, the strategy isn’t without its fair share of risks. In recent years, the streaming market has become increasingly saturated, and consumers are becoming more sensitive to price changes and the overall value proposition of subscription services.
Netflix will have to balance the need for revenue growth with the imperative to retain and satisfy its subscriber base.
Whether Netflix can sustain its growth and maintain subscriber loyalty amidst a higher price remains an open question, but with shows like Avatar: The Last Airbender setting new streaming records, you can’t blame Netflix for capitalizing on the opportunity.
