Netflix Makes Final Decision On Streaming Pricing
Netflix won’t be increasing prices in major markets like the United States in the next year. The decision was announced by Chief Financial Officer Spence Neumann during a second-quarter earnings call. He said the company plans to increase revenue from its crackdown on password-sharing crackdown instead.
“We largely paused [price increases] during paid sharing rollout, and so that’s to be expected. Most of our revenue growth this year is from growth in volume through new paid memberships. And that’s largely driven by our paid-sharing rollout,” Neumann explained via ComicBook. “It is our primary revenue accelerator in the year.”
Netflix subscription prices have been frozen for the next year as the company focuses on gaining new subscribers.
Netflix didn’t specify how much of its subscriber gains came from the password-sharing crackdown. The company only noted a substantial number of borrower households transitioning into full-paying members, along with an increase in its extra member feature. The company said its paid membership base in Canada is considerably larger than before the introduction of paid sharing.
Netflix told customers across the U.S. and over 100 other countries that if they use their accounts from locations outside their households, they will be required to be added as an extra member or subscribe individually. Failure to do so will result in the company restricting access to unauthorized devices. In the United States, the extra member add-on costs an additional $7.99 per month.
“We largely paused [price increases] during paid sharing rollout, and so that’s to be expected. Most of our revenue growth this year is from growth in volume through new paid memberships. And that’s largely driven by our paid-sharing rollout, it is our primary revenue accelerator in the year.”
Netflix CFO Spence Neumann
Meanwhile, revenue growth in Canada, which Netflix considers a dependable indicator for the American market, has accelerated. Following the implementation of paid sharing, the company introduced several supplementary controls that subscribers can use to make the most of this feature. The streamer’s ad revenue stream is also gradually building, but it won’t be a significant financial contributor in 2023.
As of July 19, Netflix ditched its lowest-cost ads option for new members in the United States and the United Kingdom. The decision encourages new subscribers to choose more expensive options to boost revenue for the streamer. The current options include the $6.99 Standard with Ads tier, the $15.49 Standard plan, and the $19.99 Premium plan.
Netflix also decided to eliminate the Basic plan in the U.S. The company introduced a new ad-supported tier called “Basic with Ads” towards the end of 2022, which has now attracted almost 5 million monthly active users, as mentioned in the company’s upfront advertising presentation in May. While active users and subscribers differ, the move indicates a preference for the ad-supported platform.
Earlier this year, complaints arose when Netflix subscribers discovered that some content was not accessible through the ad-supported subscription. The streaming service clarified that this limitation resulted from licensing restrictions and was not a tactic to compel users into opting for more expensive plans.
The Netflix “Basic with Ads” plan has been a success for the company, with 5 million monthly active users.
However, the recent decision to discontinue the most affordable ad-free subscription seems to give users a choice between watching with ads and paying a higher price to remain ad-free. Existing subscribers on this plan will be unaffected by the change until they decide to either cancel their subscription or switch to a different Netflix plan.
This is not the sole issue that Netflix has encountered in the past year. The streaming service has faced criticism due to its frequent cancellation of new shows after just one or two seasons. Some of the affected shows include Warrior Nun, The Dark Crystal: The Age of Resistance, and 1899. Following an extensive fan campaign, Warrior Nun will be returning.
