Netflix is raising prices after the company beat expectations by adding over 9 million subscribers in the third quarter of 2022.
Key Details
- Netflix reported revenue of $8.54 billion and earnings per share of $3.73 for Q3 2022, exceeding analyst estimates.
- The streaming service added nearly 9 million net paid subscribers globally, surpassing forecasts of 6.08 million. This brings Netflix’s total paid subscriber base to 247.2 million.
- Netflix’s subscriber losses in the first half of 2022 stemmed from increased competition, account-sharing crackdowns, and economic uncertainty.
- The company has introduced an ad-supported subscription tier and measures to curb password sharing in an effort to reignite growth.
- Netflix is raising its prices for the Basic tier (from $9.99 to $11.99) and Premium tier (from $19.99 to $22.99).
Why It’s Important
Netflix plans to hike its prices as the streaming giant adds more subscribers after a rocky start to 2022. Last year, Netflix lost subscribers for the first time in over a decade, but the streaming pioneer bounced back with strong third quarter results. Netflix added more subscribers in Q3 than expected, calming investor fears that the company’s growth was stalling amidst intensifying competition in the streaming space.
The turnaround can be partially attributed to the release of hits like Stranger Things season 4 and Dahmer – Monster: The Jeffrey Dahmer Story, which likely convinced some users to return to Netflix. But more impactful were the changes Netflix has implemented to combat account sharing and open up new revenue streams.
Earlier this year, Netflix began testing features to limit password sharing between households in select countries. Though unpopular with some users, these crackdowns have proven effective in converting sharers to paying subscribers. Netflix has also unveiled an ad-supported plan rolling out in November, priced at $6.99 per month in the U.S. The ad tier provides a lower cost option as economic conditions have led some households to cut back on expenses.
This comes on the announcement that Netflix will raise its prices. The company says the Basic plan will cost $11.99 compared to the $9.99 price tag it now has. The premium tier will also increase from $19.99 to $22.99.
After shedding 1.2 million subscribers in the first half of 2022, Netflix’s rebound in Q3 signals its strategies to reaccelerate growth are working. The company appears to have stemmed subscriber losses but faces ongoing challenges as competitors like Disney+ and HBO Max up their content investments.