Netflix is raising prices for certain subscription plans in the US, UK, and France, even after successfully curbing password sharing. This decision showcases the company’s increasing confidence, following a remarkable addition of 8.8 million subscribers between July and September, the highest in over two years, which led to a significant surge in Netflix’s shares.
The US premium ad-free plan is now priced $3 higher at $22.99 per month, while the UK and France experienced price increases of £2 and 2 euros, respectively.
It has been facing doubts about whether it can continue to draw in new members, as competition rises, prices climb and a Hollywood strike delays new releases.
In the first half of last year, it lost about one million subscribers, sending alarm bells ringing.
Much of the subscriber growth in the most recent quarter was driven by its move to start charging an extra fee – which amounts to a little less than half the £10.99 cost of its “standard” advert-free plan – to have more than one household on the same account.
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The launch of a cheaper plan, with adverts, accounted for about 30 percent of sign-ups in countries where it was available, Netflix said.
“All-in-all, management’s working hard to squeeze every last drop of cash possible from the available subscriber base,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
“As that cup begins to run dry, it will be a lot more important to understand exactly how successful the next phase of growth can be.”
Netflix said it believed it had the right mix of original hits and licensed fan favourites in its library to keep audiences coming, spotlighting Suits, the legal drama now known for starring Meghan Markle.
Netflix, which has been emphasising its own productions in recent years, said in its quarterly update to investors that licensing had always been important and it saw potential opportunities to license more hits “as the competitive environment evolves”.
Netflix reported quarterly revenue up 7.8 percent year-on-year at $8.5bn, while profits hit $1.67bn. The company has been trying to nudge customers onto the advertising-funded plan, which it sees as having big potential to drive profits. That is one reason for the price hike to its “basic” advert-free plan, which is no longer widely promoted on its website.