Netflix intends to increase its ad-free service prices after the Hollywood strike concludes following a series of recent price hikes by other major streaming platforms.
The Wall Street Journal was the first to report the company discussing the idea of raising its prices. The company will hike prices in several international markets but is expected to begin with the U.S. and Canada. Details about how much Netflix planned to raise prices were unclear, nor when the hikes will occur as the actors’ strike rages on.
The move comes as major entertainment companies have raised the cost of ad-free streaming services by about 25% over the last year, hoping consumers will switch to a cheaper and more lucrative ad-supported plan.
Netflix may have been taking notes, as its price hike will mark its first since January 2022. While ad-supported subscriptions come at a lower cost, analysts and streaming companies have said the advertising revenue more than offsets the lower subscription cost.
“Everyone wins with ad-supported plans,” said Ben French, an analyst for Ampere Analysis focusing on entertainment, media, and sports. “Streaming companies make more money, and it comes at a lower cost for consumers.”
But for Netflix, who has profited this year while most streaming companies haven’t, the turn to the ad-supported plan could have a unique effect on the company: offering a lower-cost subscription option to potential fleeing customers, said David Heger, an analyst at Edward Jones.
“With a service like Netflix, which is obviously the most popular streaming service, some people might view the ad-supported plan as: ‘Well, I don’t wanna get rid of Netflix, but if I go to the ad-supported option, it brings down the price point,’” Heger said.
To Heger, the lower price option can be a major selling point if consumers become more selective about their finances, as interest rates will likely remain higher for longer, weighing on the economy and people’s spending habits.
In July, Netflix discontinued its $9.99 ad-free tier, widening the price gap between its $15.49 standard plan and the $6.99 ad-supported one launched in November 2022, saving customers nearly $9 a month who choose the ad-supported option without a financial loss to Netflix.
The streaming giant’s stock has risen 28% this year, outpacing the S&P 500, which is up around 11%. Netflix’s stock rose 1.6% when the end of the writers’ strike was announced, but the growth hasn’t held up over the last week as the ongoing actors’ strike continues.
“The industry is moving toward lower-cost ad-supported packages, and Netflix is moving with it,” said French, the analyst from Ampere Analysis.