Netflix Raises Prices as Subscribers Grow, Revealing Confidence in Streaming Market
Netflix is increasing prices for certain customers in the US, UK, and France, following a successful quarter of subscriber growth. The streaming giant added 8.76 million customers in Q3, surpassing expectations and bringing its total subscriber base to 247.2 million. This growth can be attributed to a strong programming lineup and the implementation of a crackdown on password sharing.
There were concerns that enforcing individual subscriptions would lead to a loss of customers. However, the crackdown actually resulted in a surge of new sign-ups without significant cancellations. Netflix is now on track to add over 20 million new customers this year, a significant increase from the 9 million added in 2022.
Following the positive response to the introduction of paid sharing, where customers can purchase additional access for friends or family, Netflix is confident enough to raise prices in key markets. The cost of the most expensive plan in the US will increase by $3 to $23, while the basic plan will increase by $2 to $12. The company will make similar adjustments in the UK and France.
Netflix’s growth in Q3 was primarily driven by Europe, the Middle East, and Africa, with nearly 4 million new customers in that region. The average revenue per customer has remained relatively stable over the past year.
Netflix’s revenue for this quarter is projected to be $8.69 billion, with earnings of $2.15 per share, slightly lower than expectations. The company anticipates similar subscriber additions as the previous quarter for the upcoming quarter. Implementing the password crackdown in stages will continue to yield benefits in the coming quarters.
The crackdown on password sharing is one of several initiatives Netflix is taking to stimulate growth. The company has also introduced an ad-supported version of its streaming service in 12 markets. Approximately 30% of new customers in those markets opted for the ad-supported option last quarter.
While Netflix has experienced growth, many of its competitors in the streaming market have struggled financially. However, Netflix exceeded expectations with revenue and profit in Q3, reporting earnings of $3.73 per share and revenue growth of 7.8% to $8.54 billion.
Netflix expects profit margins to improve to at least 22% next year and possibly further in the future. The labor stoppage in Hollywood has had limited impact on Netflix’s release schedule, as many programs were already completed. The production company also secured a deal to release animated films from Skydance Media.
In a letter to shareholders, Netflix expressed confidence in its long-term success and underscored the strength and sustainability of its streaming business.
