Netflix Execs Pledge No Price Hikes Until at Least 2024, Say Password-Sharing Rules Will be Biggest Revenue Driver
Netflix Execs Pledge No Price Hikes Until at Least 2024, Say Password-Sharing Rules Will be Biggest Revenue Driver
It’s a fact of adulthood that things only ever seem to get more expensive, never cheaper. Streaming services are no exception; 35% of American adults think their streaming subscriptions cost too much. But streaming users also identify Netflix as the service they can’t do without, and that company is using a (somewhat) lighter touch with price increases, for now.
Netflix reported its second-quarter earnings on Wednesday when it revealed it had gained nearly six million subscribers since the beginning of April. As part of its conference call with investors and analysts, CFO Spencer Neumann pledged that it would be at least 12 months before the company considered a price increase.
“We’re now more than a year out from any price adjustments in our big revenue countries,” Neumann said. “We largely pause them during paid sharing rollout and so that’s to be expected. For ads, that new revenue stream, we’ve expected a gradual revenue build, and so that’s not expected to be a big contributor this year so continues to be on target.”
As the CFO indicated, the company is expecting its crackdown on password sharing to be its biggest driver of new revenue for the rest of 2023. Netflix has previously estimated that 100 million people worldwide were sharing the account of someone else as a way to justify its new guidelines against password sharing, which were officially rolled out in the majority of the streamer’s markets in May. The company now asks users who want to share their logins to pay $7.99 per month extra for a person outside their home to gain access.
It’s cheaper for such viewers to grab a Netflix account of their own if they don’t mind watching with ads. The company has shared that it has 5 million customers on its ad-supported plan, but in the earnings call Neumann pointed to how new the plan still was. Research has shown that signups for Netflix's Standard with Ads plan have lagged behind the similar plan on Disney+, which launched its own ad tier a month after Netflix did. Still, some estimates suggest Netflix could make up to $3.5 billion in the United States alone by the end of 2024 thanks to password-sharing restrictions alone.
Executives also spoke about the decision to shut down the Netflix Basic tier in the U.S., U.K. and Canada. For Netflix, the reasoning was clear; users who wanted that plan are now easier to monetize, either because they’ll pick a more expensive ad-free plan or a cheaper ad-supported plan, giving Netflix another customer to monetize with ad revenues. It’s a win-win for the streamer either way.
“When we drop that Basic tier, folks that would have signed up for that tier essentially sort into 2 tiers,” co-CEO Greg Peters said. “They either take the ads plan, which is that really low attractive entry-level price or they move into the Standard plan. And so we see that sorting.”
There are plenty of streaming options available for those that see the discontinuation of the Basic tier as a de facto price hike and want to cancel their Netflix. But those keeping their accounts should see their prices remain steady for at least the next year. Netflix’s Standard with Ads plan costs $6.99 per month, while the Standard plan runs $15.49, and the Premium tier costs $19.99.
Netflix
Netflix is a leading subscription-based video streaming service that offers on-demand access to an extensive library of over 3,000 movies, 2,000+ TV shows, and a growing collection of acclaimed Netflix originals. Renowned for producing groundbreaking content, Netflix has become a cultural powerhouse with hit originals like “Stranger Things,” “Wednesday,” “Squid Game,” “The Crown,” “Tiger King,” “Bridgerton,” “The Witcher,” and “Black Mirror.”