Netflix's password-sharing rules have been successful, attracting around six million new subscribers in the third quarter. As a result, the streaming giant is now considering raising its prices.
Unlike its competitors, Netflix has not increased its ad-free subscription prices this year. Instead, the company shifted its focus to stopping password-sharing outside of households, targeting the over 100 million viewers who use its service without subscribing.
Analysts say Netflix now resembles a utility in many markets, but the challenge is finding continued growth as a relatively mature company.
A media report earlier this month suggests that Netflix may raise prices after the recent Hollywood actors strike. The strike has now ended, but Netflix managed to weather it well due to its strong international presence and compelling content.
“Netflix now closely resembles a utility in many markets,” Bernstein analysts said, as per a Reuters report. “The challenge of being labelled a utility is how a maturing company continues finding growth,” the analysts added.
Netflix introduced an ad-supported plan last year, but it initially had a slow start. Analysts predict that Netflix will raise prices for its ad-free options in the coming months to encourage more subscribers to choose the ad-supported tier. This would generate higher revenue per user through commercials. Currently, the standard plan with ads costs $6.99 per month, while the ad-free plans start at $15.49.
Netflix's ad-supported viewership could double next year with these tactics. They also expect Netflix to gradually increase the number of ads shown to users over time, catching up with its rivals.
The ad-supported tier is estimated to generate around $188.1 million in revenue in the third quarter, with approximately 2.8 million new subscribers.
Wall Street predicts that Netflix will report its strongest quarterly subscriber additions this year, with revenue in the third quarter expected to rise by 7.7% to $8.54 billion. This growth is attributed to the success of popular shows like "Sex Education".
As Netflix continues to adapt to the changing streaming landscape, a potential price increase and focus on ad-supported options could further solidify its position as the leading streaming service.
