Netflix Is Raising It’s Prices Again

3 mins read

Key Takeaways

  • Netflix is increasing the cost of their Basic and Premium plans in the US, UK and France
  • The move comes as the company announce 8.8 million new users, driven partly by the crackdown on password sharing
  • Netflix stock soared on the news, jumping over 16% after the earnings call

Netflix isn’t being subtle about its intentions. After cracking down on password sharing and launching a new ad-supported tier, it’s now implementing a major price hike in the United States, France and the UK, which was announced alongside their latest earnings figures.

In short, Netflix is looking to cash in.

Despite the Hollywood writers strike impacting content production, Netflix announced today on their earnings call a swathe of positive results. The original streaming company managed to add 8.8 million new subscribers in Q3 and grow profits at the same time.

So is this a shot in the arm for a desperate company, or is Netflix just taking back its crown?

Netflix earnings impress Wall Street

Netflix stock went bonkers on Thursday, jumping 16% as traders lapped up the positive earnings results. Netflix not only notched some very satisfying results for Q3 (more on that next), but it also did so at a time when their key content competition struggles to grow market share and profits.

Today’s bump puts Netflix stock up over 36% year to date, and over 47% over the last 12 months. It’s a start turnaround for a company that saw a massive drawdown through 2022. The current share price of just over $401 is still significantly down from the all time high of $691 back in November 2021.

After reaching those heady pandemic heights, it came crashing back down to earth in 2022 as the world went back to normal and had us all spending far less time in front of the TV or tablet. By May, the stock price had plummeted to hover around $180.

Investors who had bought in at the peak were staring down a 73% loss. Not pretty. So those same investors (if they’d been brave enough to hold on) will be very pleased with these latest developments.

Netflix adds 8.8 million subscribers and grows revenue

Netflix announced profits of $3.73 per share in Q3, surpassing the Wall Street analysts’ average prediction of $3.49. The revenue was reported at $8.54 billion, matching the analysts’ forecast of the same figure.

These numbers were helped by the writers strike, at least in the short term, with the company able to save $1 billion in content costs as development on impacted shows came to a halt. Of course it will remain to be seen how this will impact their library in the next 12 to 18 months, as planned shows will potentially take longer to be released.

There was also a significant increase in paid subscriptions, with a net addition of 8.8 million, compared to the anticipated 6.1 million.

It’s clear that the password sharing armageddon that had many online forum and social media users announce that they’d be ‘deleting their account’ was overblown. While the move garnered its share of negative publicity, in hindsight it appears to have been a prudent move.

Netflix is projecting its revenue to reach $8.7 billion next quarter, slightly below analysts’ consensus of $8.78 billion.

“We’re optimistic about our prospects and the future of entertainment,” said executives in a statement to investors. Which, let’s be honest, is like Exxon Mobil saying “We like oil.”

Netflix to hike prices again

Alongside all of this good news for investors, was some bad news for customers. Netflix has announced at the same time that they’re going to be increasing prices for their non-ad supported tiers in the US, France and the UK.

The company has obviously been encouraged by the impact the password sharing crackdown has had on the bottom line, and is looking to push the envelope further to see whether further increasing the cost on consumers will slow subscriber numbers.

In the US the price for the basic plan will go from $9.99 to $11.99, while the premium plan will be increasing by $3, bringing it up to $22.99 a month. In the UK the basic plan price will go from £6.99 to £7.99 while the premium plan will go up to £17.99 from the current price of £15.99. While in France, the premium plan will be bumped by €2 a month.

The ad-supported free plan and the standard plans will both stay at their current prices.

Those might not sound like massive numbers, but when dealing with millions of subscribers, that extra few dollars a month will potentially add millions to Netflix’s bottom line.

The bottom line

We’re seeing the content wars continue to play out, with Netflix doubling down on their plans to increase profits. While detractors might see that as a risk to their business, those additional profits (or at least the money that’s not being used for share buybacks), can be used to create more content.

Which, at the end of the day, is why customers are prepared to pay each month.

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