The Real Reason Netflix Is Getting More Expensive
For the third time since 2019, Netflix users are getting hit with a reported price hike that will send subscription fees up to $15.50 per month for the standard tier. But why? According to reports, there are several reasons Netflix subscribers are having to cough up an extra $1.50 this year, but one key issue stands above the rest. You see, Netflix has been going strong as one of the world's premier streaming services for over a decade now following its transition from a mail-based order company to the Internet-fueled, at-home giant it's become today. And because of this, the suits have ultimately grown complacent.
Long gone are the days of never-ending subscriber gains and profit margins, replaced instead with plateauing numbers and little to no growth in quarterly data (via The Verge). What it all boils down to, in the end, is revenue — something Netflix has reportedly been struggling with as of late. Below, we shall discuss what has led to these problems and why it ultimately plays a role in the service's latest price jumps.
Dwindling subscriber growth and revenue numbers to blame for Netflix price hike
While Netflix continues to add users on a yearly basis, experts say that revenue and subscriber growth has actually "waned over the past several quarters" due to the COVID-19 pandemic, rising budgets for original content, and audiences "maturing" (via CNN).
"Subscriber growth in the US and Canada has been a difficult story to tell," explained Andrew Hare, a senior vice president of research at media consulting firm Magid, to CNN Business. "That's why they need to talk about the global [subscription] growth story, positive cash flow, new content, new growth opportunities like gaming, and potentially new business models and markets." According to analysts, one of those new business models is continuing to raise subscription prices, despite what users may think.
"They clearly believe they still have the pricing power to do so and that they provide an exceptional value for the money," Hare told CNN. "Raising prices is just one lever they can continue to pull right now." Parks Associates Director of Research Paul Erickson, who spoke to The Verge, believes Netflix execs aren't going to stop the price increases anytime soon. "They're going to continue to tighten up their finances as time goes by," he said. "This is the fundamental way in which they do that — small incremental price changes over time. Because they feel they are so well entrenched, and their customers are loyal, they feel that it's not going to materially affect their subscribership."