Netflix Plans to Raise Prices Amidst Economic Challenges


Netflix Inc. is reportedly considering raising its prices once the current actors’ strike comes to an end, according to a recent report by the Wall Street Journal. However, market volatility and the global economic slowdown may pose challenges to this decision, as highlighted by Benchmark.

The report indicates that Netflix is following the lead of its competitors and exploring the potential benefits of offering a lower-priced service with advertising, known as AVOD (advertising video on demand). This approach could prove to be significantly lucrative compared to the traditional SVOD (streaming video on demand) model.

As a result, competing services like Peacock and Max, which prioritize AVOD and feature high CPM live sports, may benefit from this trend. An executive from Netflix mentioned in May that their ad tier already boasts nearly 5 million monthly active users, making it comparable to other services in terms of popularity.

In January 2022, Netflix last raised its prices, bringing the cost of its ad-free standard plan to $15.49 from $14. The higher-definition 4K version also saw an increase, from $18 to $20 per month. Additionally, Netflix eliminated its mid-tier ad-free plan and raised the entry level price to $15.49 from the previous $9.99. To address password sharing, they introduced a $7.99 surcharge for users outside of the main household.

Given the current economic climate and market conditions, Benchmark maintains its sell rating on Netflix stock. It remains to be seen how the streaming giant will navigate these challenges and adapt its pricing strategy in the future.

Rising Prices for Streaming Services

Streaming services are becoming increasingly expensive, with some platforms like Discovery+ and Disney+ planning to raise their prices. Discovery+ will now charge $8.99 for its ad-free service, up from $6.99, while keeping its AVOD option at $4.99 per month. Similarly, Disney is also considering price hikes for its Disney+, Hulu, and ESPN services, as announced earlier this year.

The recent strike by the Writers Guild of America has finally come to an end. However, it seems that the new contract will only result in minimal compensation increases for Netflix. The Writers Guild’s demands were met with moderate concessions, but there won’t be any outright streaming residuals. Instead, bonuses will only be given for the most successful shows. As a result, Benchmark, a leading financial firm, is less optimistic about this outcome than expected.

Despite these challenges, Netflix is still viewed as more of a media stock than a tech stock. The company has been successful in implementing initiatives to combat password sharing and improve its AVOD offerings. However, Benchmark acknowledges that the strong U.S. dollar might pose a threat to the company’s projected double-digit revenue growth in the fourth quarter of 2023. Nevertheless, Netflix’s position as the global leader in video streaming remains strong.

In terms of stock performance, Netflix has been performing well. In premarket trading, the stock was up by 0.5% and has gained 28% year-to-date. This outperforms the S&P 500, which has only gained 10%.

Overall, the streaming landscape is seeing increasing prices across various platforms. While Netflix faces challenges with the recent Writers Guild strike and potential hurdles in revenue growth, it remains a prominent player in the global streaming industry.

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