Netflix (NASDAQ: NFLX) is planning to increase the price of its ad-free streaming service in the wake of the ongoing Hollywood actors’ strike, as first reported by the Wall Street Journal. This move follows a trend of price hikes across major streaming platforms in an effort to boost profitability.
The price increase discussions at Netflix are expected to encompass several global markets, with initial changes likely to take effect in the United States and Canada. However, specific details regarding the extent of the price hike and its implementation date remain undisclosed, as Netflix declined to comment.
Over the past year, major ad-free streaming services have collectively raised their prices by approximately 25%. These increases come as entertainment companies seek to steer budget-conscious customers towards more cost-effective ad-supported subscription plans, which tend to be more lucrative.
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Warner Bros. Discovery recently announced an increase in the monthly cost of its ad-free Discovery+ streaming service from $6.99 to $8.99, while the price for its ad-supported platform remains at $4.99 per month. Streaming platforms are also exploring the creation of new pricing tiers focused on exclusive content, such as live sports, without jeopardizing their core offerings.
Disney is reportedly considering launching a new live-sports tier for Disney+ in markets outside of the US, and Warner Bros. Discovery plans to add live sports to its Max streaming service for an additional $9.99 per month. Apple has already introduced a Major League Soccer (MLS) Season Pass, priced at $12.99 per month for Apple TV+ subscribers and $14.99 for non-subscribers, which saw a surge in subscriptions following soccer superstar Lionel Messi’s move to Inter Miami.
Netflix, distinguished by its profitable streaming business, has stood as the only major streaming company not to raise prices in the past year. Instead, the company has focused on revenue generation through measures such as cracking down on password sharing. Their last price increase took place in January 2022.
Netflix intends to wait until the ongoing Hollywood writer and actor strikes conclude before implementing its price hike. While the Writers Guild of America recently reached a tentative agreement with studios, negotiations between the Screen Actors Guild and Hollywood studios have also resumed.
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This move towards increasing prices in the ad-free streaming market is aimed at addressing rising talent costs stemming from the deals with writers, directors, and actors. Netflix’s discontinuation of its $9.99-a-month basic ad-free tier in the US has further widened the price gap between its $15.49 standard ad-free plan and the $6.99 ad-supported tier introduced in November 2022.
Other streaming platforms, including Disney, Hulu, and ESPN+, have announced forthcoming price increases for their ad-free versions. These adjustments come after entertainment companies incurred significant losses while aggressively investing in content at low subscription prices in pursuit of rapid growth.
These price hikes are also driving greater interest in ad-supported alternatives. For instance, following Disney’s upcoming price increases, the ad-supported versions of Disney+ and Hulu will be substantially more affordable than their ad-free counterparts.
The trend towards higher prices for ad-free streaming platforms has been influenced by the fact that ad-supported versions are proving more financially viable due to the revenue generated from advertising. Amazon is also set to introduce a new pricing tier for its Prime Video service, offering an ad-free option for an additional $2.99 to US subscribers starting next year.
Netflix has been taking additional measures to increase revenue, such as introducing a fee for households sharing accounts with non-residents and cracking down on unauthorized account sharing, effectively resulting in a de facto price increase.
Information for this story was found via the Wall Street Journal, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
