May 30, 2024


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Why did Netflix increase its prices in the US and Canada?

New York (CNN Business) – Netflix The fourth quarter earnings report and all eyes will be on growth this Thursday Subscribers Of streamer. This time there is something new for investors and industry observers: Netflix has raised its prices.

The company raised subscription costs on Friday, raising its share price and raising eyebrows around the streaming world, as well as “Why?”

“They clearly believe they have the pricing power to do that and offer exceptional value for money,” Andrew Hare, senior vice president of research at media consulting firm Magid, told CNN Business.

Hare believes that Netflix (NFLX) sees the U.S. and Canadian markets maturing and seeks to offset their growth with ARPU or average revenue per user.

“There is pressure to drive overall growth, create positive cash flow, all while keeping up with rising product costs and competition,” he said. “Although I do not know for how long, raising prices is one of the levers they can continue to pull at this time.”

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Streaming Media on Friday announced that it would increase the monthly price of the US subscription to its standard plan from $ 1.50 to $ 15.49 and its base plan from $ 1 to $ 9.99. The premium plan increased by $ 2 per month to $ 19.99.

In Canada, Netflix’s standard plan increased C $ 1.50 to $ 16.49 and premium plan C $ 2 to $ 20.99. His basic plan remained unchanged.

Wall Street was happy with the news, with Netflix shares up about 2% on Friday.

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One dollar here and one dollar not much there, but it’s important for both Netflix and consumers.

Mark Zgutowicz, senior analyst at Rosenblatt Securities, says Netflix spends a ton of money on content around the world, where its two largest markets, the US and Canada, are slow to subscribe. “Then decreased. Several quarters.”

“We estimate that Netflix will spend $ 17 billion globally this year, which will be less than $ 12 billion by 2020, which turned out to be the lowest year due to Govt,” he said.

For consumers, the price increase could be as high as $ 1.50 in recent years, from Disney + to Peacock to HPO Max (owned by CNN’s parent company Warnermedia). Streaming falls into the pockets of consumers, so the king of streaming aside, the price increase for any service is significant.

Like Netflix, other industries do the same, so this price hike provides a hint to the company’s streaming competitors that they may raise their own prices at some point.

“I think this applies to Disney +, but I’m not sure if others like Peacock or Paramount + have the same width as Netflix and Disney (DIS),” he said. “It also provides some space for HBO Max to raise prices.”

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Hare believes that if Netflix generates a regular number of users, the company should focus on other ways to please its investors.

“Telling the growth of subscribers in the US and Canada is a tough story,” Hare said. “That’s why they need to talk about the global development story [de suscripciones], Positive cash flow, new content, new development opportunities such as games and potentially new business models and markets. “

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Of course, Netflix is ​​still Netflix, and it is very popular worldwide with its 213.5 million users.

“In the short term, Netflix will be the number one streaming service locally and overseas,” Hare said.

What happens after that? To be determined. Netflix faces challenges in terms of subscriber growth, production costs and growing consumer habits, Hare said.

“In the last decade they have rediscovered the entertainment industry.” He added. “Now begins a new era of challenges and opportunities.”