Why Is Netflix Changing Its Prices So Much Lately
For the longest time, a subscription to Netflix felt like a complete steal. For $10 or so, you could access an array of original Netflix titles and favorites from third parties. But that’s slowly changing after Netflix raised the price of its subscriptions earlier this year — the third time it’s done so since 2019.
That’s not to say a current Netflix subscription isn’t a good deal, especially compared to cable and satellite packages which are still more than double its price. But customers are starting to get weary that Netflix will inch closer toward those cable prices more and more as the years go on. If we could gamble on that happening or not — like if it were betting on an NBA game — we would wager that yes, Netflix is barely getting started on its price hikes. Allow us to explain:
Streaming Is Competitive
The streaming landscape has been flipped in the last two-and-a-half years with the launches of Disney+ and HBO Max. Due to the increased competition, Netflix has had to evolve — including price changes.
Image courtesy of CNET
The standard Netflix subscription starts at $15.50 in the United States — that’s higher than competitors HBO Max (its premium ad-free package starts at $15 ) and a Disney-Hulu-ESPN bundle ($14). But ironically enough, part of the reason why Netflix has had to hike prices is because it has been stung by those competitors, as well as the likes of Paramount+, Peacock, and many more to name.
Netflix isn’t the only game in town anymore like it once was. Back then, it could rack up subscribers much more easier. Now? Well, it’s tougher for two reasons. One, former subscribers might’ve churned their subscription in favor of other competitor(s). Two, the pool of people left to get to subscribe to Netflix is small — especially in the United States (international markets are different). C’mon, if you’re American, do you know someone who hasn’t used Netflix before? Probably not.
But as a publicly-traded company, which Netflix is, you can’t use either of those excuses when speaking to shareholders, who solely want to see growth — no matter how so. Therefore, Netflix has sought to inflate top-line revenues with price hikes to existing customers rather than finding new ones entirely.
Account Sharing Could Be Next
It’s absolutely no secret to anyone, including Netflix executives, that customers share accounts. So while one person might be paying for the subscription, two or more are actually consuming content through that one account — and avoiding paying in their own right. That’s a lot of lost revenue, which Netflix has long tolerated. But as the saying goes, “all good things must come to an end.”
Just recently in March, Netflix openly said they were testing a feature which would allow primary account holders to add up to two users outside their households for a small fee. Right now, the feature is being tested only in Chile, Costa Rica, and Peru. Theoretically, if the tests do well here, it could be expanded and/or released at a global scale.
That’s not the only test Netflix is running when it comes to account sharing though. Another is promoting users to verify their login credentials to continue using their accounts. Again, the rollout is small for now, but it’s obvious Netflix is thinking deeply about cracking down on account sharing — or else there wouldn’t be separate tests like these running at the same time.
Investors Have Soured On Streaming
Squid Game proved to be a breakout hit for Netflix last season, but funding shows like this doesn’t come cheap. The costs, per usual, get passed onto customers.
Image courtesy of Los Angeles Times
Back in January, Netflix’s stock tumbled by 22 percent in a single day — the company’s largest fall-off since 2012. While streaming service stocks were high performers during COVID-era when people were stuck at home, investors aren’t as optimistic now. Inflation happening worldwide doesn’t help matters either since investors want profitability now, not down the line which has been Netflix’s message from the get-go.
Therefore, there’s less money in the public markets for Netflix to find capital. They’ll have to look inward to fund future shows and movies — and that means price increases for the 220-plus million Netflix-paying users it has right now.
Unfortunately, this is the way of a lot of tech companies, not just Netflix. They launch by undercutting the competition with super low prices and once they’ve grown a massive user base, the price increases begin (and don’t stop). Don’t be surprised to see more change from Netflix in the years ahead.