Netflix raises prices for premium plans: NPR

SAN FRANCISCO — Netflix on Wednesday reported stronger summer subscriber growth than industry analysts expected, suggesting the video streaming service’s crackdown on password sharing is converting former freeloaders into paying customers.

In an effort to bring in more revenue, Netflix is ​​also increasing the price of its most expensive streaming service in the U.S. from $2 to $23 per month (a 10% increase), and its lowest-priced ad-free streaming plan from $12 — an additional 2 rise in the value of the dollar. The $15.50 monthly price of Netflix’s most popular streaming option in the U.S. will remain unchanged, as will the $7 monthly plan that includes intermittent commercials.

It also increased prices for subscribers in the UK and France.

The company added about 8.8 million subscribers worldwide between July and September, more than triple the number from the same period last year, when the company was struggling to recover from a decline in customers in the first half of last year. The increase brings Netflix’s global subscriber count to about 247 million, well above the 243.8 million expected by analysts surveyed by FactSet Research.

Netflix’s results also exceeded analyst expectations, which shape investor expectations. The Los Gatos, California-based company had revenue of $1.68 billion, or $3.73 per share, a 20% increase from the same period last year, and sales of $8.54 billion, an 8% increase.

The company’s stock price soared more than 12% in after-hours trading after the latest quarterly data was released. Netflix stock has risen about 30% so far this year amid mounting evidence that the company’s video streaming service is faring better than others amid a sea of ​​competitors that are testing the financial limits of many households. are doing.

Netflix has gained more than 16 million subscribers in the first nine months of this year, already surpassing the 8.9 million subscribers it added for all of last year. But that’s just a fraction of the more than 36 million additional subscribers Netflix gained in 2020, and the pandemic came at a time when people were looking for ways to stay entertained while stuck at home. It has become a treasure trove for the service.

This year’s increase in subscribers came despite an entertainment labor dispute centered in part on complaints by writers and actors about unfairly low compensation paid by video streaming services such as Netflix. By leveraging its backlog of TV series and films already completed in the U.S., as well as productions produced in international markets unaffected by labor disputes, the company can leverage the recently concluded writers’ strike and ongoing actors’ I was able to survive the strike.

Netflix said it expects to spend about $17 billion on TV series and movies next year in an effort to rebuild its library of original programming once everyone returns to work.

Netflix’s decision to do away with the long-established practice of allowing subscribers to share their account passwords with friends and family outside their household means more views on the video service for free. users now sign up for their own accounts. The crackdown is also helping Netflix in other ways. Current subscribers can pay a higher monthly fee to share their account with someone who lives outside their household.

“We’re very happy with the way things are going,” Netflix co-CEO Greg Peters said during a video conference call Wednesday when asked about the crackdown on password sharing. He predicted that the crackdown would further boost subscriber profits for at least a few more quarters as Netflix confronts more “renter households” who watch the service’s shows without paying.

The apparent success of the crackdown on password sharing will now allow executives to focus on other ways to bring in more revenue, such as lower-priced options that include advertising, which was introduced a year ago.

Netflix’s decision to open its service to commercials has yet to yield significant benefits. But Harding-Rovner analyst Uday Cheruvu says the personal information the company collects from viewers’ entertainment preferences will most likely make them buy its products in the same way as internet powerhouses like Google. He said he believes things will change once advertisers realize they can target their commercials to consumers. And I’ve been doing Facebook for years. Peters said on a video conference call that Netflix is ​​already working with advertising partner Microsoft to better target its commercials.

“I think the advertising potential of Netflix is ​​underestimated,” Cherub said. “Viewer engagement on video ads can be many times stronger than on social media platforms.”

Netflix said in a letter to shareholders that about 30% of new subscribers are choosing its $7 plan with commercials, and that this growth will likely lead to more spending from advertisers. The higher price of Netflix’s premium plans also likely drives more subscribers to ad-supported options.

“The era of ‘streamflation’ is upon us, and consumers should expect to be hit with higher prices, restrictions on password sharing, and the temptation of ad-supported options,” said Scott Purdy, U.S. media leader at KPMG. said.