Netflix price hikes on the horizon as sign-ups surge

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The streaming giant gained more than 13 million subscribers in the three months to December, claiming its crackdown on password sharing was a success.

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Netflix defied Wall Street expectations in the final months of 2023 by landing 13.1 million subscriptions in its latest quarter, according to its new earnings report.

This is the best quarterly figure recorded since the pandemic year of 2020, and brings Netflix’s total subscribers to 260.3 million globally.

The streaming platform also reported an operating profit (profit minus operating expenses) of $1.5 billion (€1.38 billion) in the latest quarter, up from $550 million a year earlier.

“These latest results reaffirm that Netflix is ​​firmly the king among all streamers,” said Paolo Pescatore, analyst and founder of PP Foresight. “This is despite last year’s writers’ strike which is unlikely to have a negative impact on the streamer.”

Aside from last year’s industrial action in Hollywood, which saw actors and writers out of work for several months, some shareholders were also nervous about the effect of Netflix’s crackdown on password sharing.

In response to the loss of subscribers in 2022, the streaming giant began limiting account sharing in mid-2023, a strategy that initially provoked public anger.

Much to Netflix’s satisfaction, their elimination of password sharing still paid off.

“We believe we have successfully addressed account sharing, ensuring that when people enjoy Netflix they also pay for the service,” the company said in a letter to shareholders.

The streaming giant suspended price increases as it rolled out its anti-sharing strategy last year, but this is not expected to continue into 2024.

Greg Peters, co-chief executive, explained: “We largely suspended price increases while we were rolling out paid sharing work because we saw it as a form of substitute price increase. Now that we’ve gotten through that, we’re able to resume our kind of standard approach to price increases.”

Ad-supported subscriptions

According to the earnings report, many of Netflix’s new customers are opting for the cheapest plans that include ad breaks.

The streamer said its advertising plan accounts for 40% of all new signups in countries with this type of subscription, meaning it is considering eliminating the basic ad-free subscription.

Basic ad-free plans, which cost €13.49 per month, could be phased out in Canada and the United Kingdom in the second quarter of this year.

This type of subscription is significantly more expensive than the $5.99 ad-supported plan and less than the $19.99 premium plan.

After years of rejecting ad-supported viewing, Netflix’s new direction is being branded by some as hypocritical.

In the past, the platform distinguished itself from many linear channels by offering uninterrupted content, arguing that advertising harmed the viewer experience.

A deal with World Wrestling Entertainment

On Tuesday, Netflix also announced a 10-year, $5 billion (€4.59 billion) deal with World Wrestling Entertainment, which will bring the weekly WWE Raw show to the platform.

The move takes Netflix further into the live sports streaming market, a direction also taken by competing platforms like Amazon and Apple.

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“WWE Raw is sports entertainment, which is right in the sweet spot of our sports business, which is sports drama,” said co-CEO Theodore A. Sarandos.

In November, Netflix launched its first live sporting event, “The Netflix Cup,” after airing live shows “Love is Blind: Brazil” and “Chris Rock: Selective Outrage” earlier in the year.

The streaming company, however, told shareholders it was not interested in bidding for conventional sports rights.

“Does this make sense [for Netflix] “to strengthen its offering with live events (entertainment) to offer a diversified portfolio of programming,” said Paolo Pescatore. “This way it can satisfy the whole family.”

Netflix’s next live event is the Screen Actors Guild Awards, scheduled for February 24.

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