Buckle up to pay even more, Netflix subscribers. In its Q4 shareholder letter, the company all but assured another price hike in the near future.
The company’s letter included this sentence: “As we invest in and improve Netflix, we’ll occasionally ask our members to pay a little extra to reflect those improvements, which in turn helps drive the positive flywheel of additional investment to further improve and grow our service.”
Netflix last raised prices in October of 2023. In July of last year, the company's CFO said Netflix wouldn't raise prices until mid-2024.
Netflix may feel it has the momentum to apply another price hike since it just had its best quarter of domestic subscriber growth since the pandemic-fueled leap of Q2 2020. Netflix added nearly 3 million subscribers in the U.S. and Canada to end 2023.
The company said it’s continuing to refine its strategy regarding pricing, advertising, and account-sharing. It’s notable that two of those three pillars were thought to be completely off the table just a few years ago. Netflix leaders had previously said the service would never have ads. And the company once posted “Love is sharing a password” on Twitter. But having seen the eye-popping subscriber and revenue growth from competitors who introduced ad-supported tiers, Netflix pivoted. Today, they’re clearly reaping the rewards.
Netflix is also looking to increase its content budget. The company announced today that it will spend $5 billion to host WWE events over the next decade. Netflix called out its competitors in today’s shareholder letter, writing, “As many of our competitors cut back on their content spend, we continue to invest in our slate.” The company promises a “big, bold slate” of content in 2024 after the writers and actors strikes derailed the release calendar in 2023.
The question now becomes whether Netflix will raise prices on some or all of its tiers. The last price hike did not impact the standard ad-free subscription plan, so that could be ripe for an increase. Most SVOD companies prefer its users to choose the ad-supported plan, since the ad revenue outpaces the subscription income. A raise in the ad-free plan would likely push some subscribers to adopt the ad-supported tier, rather than abandoning the service altogether. Unlike its peers, Netflix has shown remarkably low churn throughout the years. People abandon every other streamer faster than they leave Netflix.
As we noted in December, Netflix has essentially won the streaming wars. With Warner Bros. Discovery and Disney willing to share their libraries with Netflix, Prime Video poised to force ads on its customers, and Paramount Global spiraling into oblivion, Netflix is in the strongest position of any streaming company. While that’s great for Netflix and its shareholders, it also means they’re the service most likely to raise its subscription fees.
Netflix
Netflix is a subscription video streaming service that includes on-demand access to 3,000+ movies, 2,000+ TV Shows, and Netflix Originals like Stranger Things, Squid Game, The Crown, Tiger King, and Bridgerton. They are constantly adding new shows and movies. Some of their Academy Award-winning exclusives include Roma, Marriage Story, Mank, and Ma Rainey’s Black Bottom.