In a year marked by rising subscription prices across major streaming platforms like Disney+ and Peacock, Netflix (NFLX) has decided to hold off on raising its US subscription fees — for now. Despite this pause in price hikes, the streaming giant remains in the spotlight after delivering strong third-quarter results, solidifying its position as a leader in the streaming space.
“We try to think about our pricing, not in relationship to competitors, but from the value that we’re delivering to members,” Netflix co-CEO Greg Peters said during the company’s third-quarter earnings call on Thursday. “We want to have a range of price points. We think that’s healthy.”
Netflix’s approach to balancing value with price seems to be paying off. The company exceeded Wall Street expectations for the third quarter, adding over 5 million new subscribers during the period. This growth is particularly notable in the highly competitive streaming market, where several platforms are vying for consumer attention amid broader concerns about “subscription fatigue” — the idea that consumers are growing weary of the ever-increasing number of services they’re expected to subscribe to.
The stock surged by as much as 5% in after-hours trading following the earnings report, bringing Netflix’s share price closer to its all-time high of around $730. This performance is a strong signal to investors that Netflix remains a formidable force in the streaming industry, especially as it continues to grow its subscriber base while other platforms have faced stagnation.
While Netflix has opted not to raise US prices just yet, analysts believe a price hike could be on the horizon, possibly by 2025. Some analysts, like Citi’s Jason Bazinet, suggest that a 12% price increase in the US market could provide a boost to the company’s stock in the near term.
“Given Netflix’s low cost per viewed hour, we see scope for the firm to raise US prices by 12% in 2025,” Bazinet wrote in a note to clients ahead of Netflix’s Q3 earnings release. With over 94 billion hours of content viewed from January to June 2023, according to Netflix’s biannual viewership report, Bazinet’s projection reflects the perceived value that subscribers derive from Netflix’s content library.
Netflix last raised prices for its Standard and Premium plans in January 2022. The Standard plan’s price was increased from $13.99 to $15.49 per month, while the Premium plan saw a $2 bump to $19.99. Another price hike followed in October 2023 for the Premium tier, pushing the monthly cost to $22.99. While Netflix has not yet raised the price of its ad-supported plan, it recently discontinued its lowest-priced ad-free tier, which has prompted some subscribers to shift to higher-priced plans or the ad-supported option.
The company’s decision to leave the ad-supported tier at $6.99 per month has drawn praise from some analysts and consumers alike. “We love the low price point and increased accessibility that comes with our ad plan,” Peters remarked. “It represents an incredible value.” This offering remains among the most affordable ad-supported options in the streaming world, providing Netflix a competitive edge for price-conscious consumers.
While Netflix has held off on raising prices in the US, it has not been as cautious elsewhere. The company has already implemented price increases in markets such as Scandinavia and Japan, and plans to raise subscription costs in Spain and Italy in the coming months.
These global adjustments reflect Netflix’s broader strategy of testing different pricing models in various markets based on local consumption habits and competitive dynamics. As Netflix continues to expand internationally, localized pricing strategies allow the company to fine-tune its offerings without alienating its subscriber base in key regions.
Netflix’s ad-supported tier, which launched less than two years ago, has been a focal point in the company’s pricing strategy. At just $6.99 per month, it is one of the most affordable streaming options in the market, and Netflix is banking on its potential to attract a broad range of consumers. As inflationary pressures persist and consumers become more selective about their entertainment budgets, ad-supported streaming could become an increasingly important revenue driver for Netflix.
The ad tier has opened up new avenues for subscriber growth, particularly among viewers who may have previously considered Netflix too expensive. By offering a lower-cost option, Netflix aims to tap into audiences that are more sensitive to price increases but still value high-quality streaming content. Moreover, advertising revenue from this tier provides a growing secondary income stream for the company, which could partially offset the need for price hikes in the future.
“We’ll continually try to offer consumers a spread of plan choices, the right features at the right price point, and evaluate that and evolve it based on what we think works,” Peters said during the earnings call, underscoring Netflix’s commitment to offering flexible pricing.
Netflix’s decision to delay a price hike in the US is part of a delicate balancing act. On one hand, the company has demonstrated its ability to grow subscribers even in a crowded marketplace. On the other hand, Wall Street is eager for the company to raise prices and boost revenues further, especially given the company’s massive content budget and global expansion plans.
In 2022 alone, Netflix spent approximately $17 billion on content, and analysts expect this number to continue growing as the company seeks to maintain its competitive edge with new original programming, licensed content, and high-profile acquisitions. Balancing the need to fund its content pipeline with pricing that keeps subscribers engaged is a challenge Netflix must navigate carefully.
Many industry insiders view Netflix’s pricing strategy as a key advantage over its competitors. While services like Disney+ and Hulu have raised prices, Netflix has avoided making knee-jerk adjustments in response to its rivals. This disciplined approach to pricing, combined with a robust content library and an expanding ad-supported model, positions Netflix as a more stable and predictable player in the streaming wars.
As Netflix continues to dominate the streaming landscape, its next moves will be closely watched by both investors and competitors. The company has made it clear that it will continue to assess key metrics — including engagement, acquisition, and retention — to determine the best time to raise prices in the US.
The long-term success of Netflix may hinge on how well it manages this balance between providing value for subscribers and meeting investor expectations for revenue growth. A US price hike seems inevitable, but the timing will depend on a variety of factors, from subscriber growth trends to the performance of its ad-supported tier.
For now, Netflix appears content to bide its time, focusing on delivering high-quality content and expanding its global footprint. With new markets to conquer and billions of hours of content being consumed on its platform, the streaming giant is showing no signs of slowing down.
Netflix’s decision not to raise US subscription prices in the near term is a strategic move that reflects the company’s confidence in its value proposition. By focusing on delivering content that resonates with viewers and offering pricing options that cater to a range of budgets, Netflix has positioned itself as the leader in a highly competitive industry.
