United States: Netflix is revising its pricing strategy, beginning to raise subscription costs in select countries as subscriber growth begins to slow following its crackdown on password sharing. Netflix has announced that, “it is working to improve our monetisation by refining our plans and pricing” with recent additions already implemented in Japan and parts of Europe, the Middle East, and Africa.
Starting this week, subscribers in Italy and Spain will also notice price hikes. This development comes as Netflix reported the addition of 5.1 million subscribers in the three months ending September, its smallest growth in over a year.
As competition heightens, Netflix faces pressure to indicate a clear path for growth in the coming years, particularly as cultivating new subscribers becomes increasingly challenging. Following a prior slowdown in 2022, Netflix successfully raised a crackdown on password sharing and launched an ad-supported streaming option, both of which contributed to a revival in subscriber numbers. Since implementing these strategies last year, the streaming giant has welcomed over 45 million new members, bringing its global total to more than 282 million.
Analysts anticipate that advertising could eventually become a significant revenue stream for Netflix, though the company cautioned that it remains “early days” for this endeavour, with meaningful growth not expected until next year. Notably, the ad-supported plan, which is the company’s most reasonable option, accounted for 50% of new sign-ups in regions where it is available during the latest quarter.
Despite the challenges, Netflix reported a 15% year-over-year revenue increase for the July-September period, reaching over $9.8 billion (£7.5 billion), and a profit exceeding $2.3 billion. Shares rose about 4% in after-hours trading as subscriber growth surpassed analyst expectations.
Historically, Netflix has pushed pricing changes in smaller markets before proceeding them out in major regions like the US and UK. The company’s last price increase in these larger markets occurred last year, but it has left the cost of its popular “standard plan” without ads unchanged since 2022.
Matt Britzman, a senior equity analyst at Hargreaves Lansdown, highlighted the importance of maintaining a strong content lineup to justify price increases without alienating subscribers. Matt Britzman stated that, “This is inherently a fickle market, with consumers happy to swap streamers if they don’t think they’re getting value. The addition of fresh content, particularly in areas like sporting events, could give Netflix the advantage it needs to push prices higher and keep customers coming back for more.”
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