Netflix is raising prices in the U.S. and Canada, with its most popular subscription tier going from $13.99 a month to $15.49 in the U.S.
The lowest level of service climbed $1 to $9.99 and the premium tier is now $19.99, up from $17.99.
In Canada, the basic plan price did not change, but the standard plan (aka the middle tier) rose to $16.49 Canadian from $14.99.
Shares in Netflix immediately jumped on the news, reaching as high as $538 before calming down to close at $525.69, up 1%. It has slumped thus far in 2022 along with most other Nasdaq stocks.
The price increases are the first in North America since October 2020 and take effect for all new subscribers and will be phased in for current ones in the coming weeks.
With 214 million global subscribers, Netflix remains the leader in streaming and its scale gives it considerable leverage in terms of price. North America is a major financial engine for the company overall, even though growth there has flattened of late and the base of 74 million customers is just one-third of the overall total. While every price increase sees a certain number of subscribers “churn” (the trade term for canceling a subscription), the overall effect is more revenue.
The company is now cash flow positive and doesn’t need to borrow to fund its operations but it relies on rising prices to bankroll its massive spending on programming. Netflix has said it expected to spend $17 billion on original and acquired content in 2021. No figure for 2022 has been given, but Co-CEOs Reed Hastings and Ted Sarandos have strongly signaled in recent quarters that they plan to continue their strategy of stair-step increases in spending. While some media companies spend even more, when live sports programming is factored in, the reality is that no one is spending on the level of Netflix.
Viewership has continued to establish new benchmarks lately, with star-driven movies Red Notice and Don’t Look Up vaulting to the top of the movie chart and Squid Game becoming a phenomenon.
Management at Netflix will address pricing and other strategic elements next Thursday when the company reports its fourth-quarter financial results.
Regarding today’s move, a spokesperson said in a statement to Leak Herald, “We understand people have more entertainment choices than ever and we’re committed to delivering an even better experience for our members. We’re updating our prices so that we can continue to offer a wide variety of quality entertainment options. As always we offer a range of plans so members can pick a price that works for their budget.”
The streaming field has continued to get crowded, with Disney, WarnerMedia, Apple and NBCUniversal all throwing their hats in the ring over the past two-plus years. WarnerMedia’s HBO Max, which ended 2021 with 73.8 million subscribers when combined with linear HBO, costs $15 for its commercial-free version, which used to be the top end of the market.
Price has been a decisions all new entrants have grappled with. Disney, Apple and others have offered a period of free access to certain wireless or hardware consumers and have opted to keep prices on the lower end of the scale even without those incentives. NBCU’s Peacock has a free tier supported by advertising and a Premium version that costs $5 for most subscribers.
Price hikes will be a fact of life in streaming as the marketplace continues to evolve. Though Disney+ began at just $7 a month, its fast start after launching in November 2019 prompted the company to announce a $1-a-month increase in December 2020. Other players have moved the other way in search of scale – HBO Max last June introduced a cheaper, ad-supported tier priced at $10 a month.