Netflix Nears Price Hike After Shattering Records with Password-Sharing Crackdown
In a seismic shift for the streaming industry, Netflix (NFLX.O) has gained a staggering 6 million subscribers in the third quarter, spearheaded by its formidable campaign against password-sharing. As anticipation builds for Netflix's upcoming earnings report, it is widely anticipated that the streaming behemoth is set to raise the curtain on potential price increases.
Unlike its counterparts, such as Walt Disney (DIS.N), which embarked on a journey of ad-free price hikes, Netflix's strategy has taken a different route. The streaming pioneer opted to rein in password-sharing beyond household boundaries, effectively luring in over 100 million viewers who previously enjoyed its service without a subscription.
Commenting on this transformation, analysts at Bernstein have drawn a striking parallel, likening Netflix to a utility service in numerous markets. The challenge, they suggest, lies in maintaining growth as the company matures.
Interestingly, reports suggest that Netflix might consider raising its prices in the wake of the recent Hollywood actors' strike, which occurred earlier this October. Following five months of tumultuous negotiations, the Writers Guild of America (WGA) ultimately greenlit a new contract with major studios.
In stark contrast to many other industry players, Netflix has remained robust in the face of this strike, primarily due to its expansive international presence and a compelling content library.
Despite a somewhat sluggish start for its adplan, which debuted last year, analysts are betting on Netflix increasing the prices for its ad-free subscriptions in the near future. The aim is to incentivize more subscribers to explore the alternative tier, which incorporates commercials to augment per-user revenues.
Notably, the majority of new Netflix subscribers, post-password crackdown, have gravitated toward the ad-free plans. The ad-supported standard plan currently costs $6.99 per month, while ad-free options start at $15.49.
Insider Intelligence analyst Ross Benes envisions Netflix doubling its ad-supported viewership in the coming year by employing these strategic maneuvers. Furthermore, he expects Netflix to gradually increase the frequency of advertisements, inching closer to its industry competitors.
The ad-supported tier is projected to yield approximately $188.1 million in revenue for the third quarter ending in September, accompanied by an impressive 2.8 million subscriber additions, according to Visible Alpha estimates.
On a broader scale, Wall Street is bracing for Netflix to unveil its most substantial quarterly surge in subscribers this year, as indicated by LSEG data. With revenue for the third quarter forecasted to have surged by a remarkable 7.7% to reach $8.54 billion, Netflix's latest triumph can be attributed to a robust content lineup, including the latest seasons of fan-favorites like "Sex Education" and "Virgin River."
