Netflix, the streaming giant, is implementing price hikes in several countries as the surge in growth from its recent password-sharing crackdown begins to slow down. The company has already increased subscription fees in Japan and select regions across Europe, the Middle East, and Africa over the past month, with Italy and Spain next in line for price adjustments.
In its latest financial report, Netflix revealed the addition of 5.1 million new subscribers between July and September. While this figure exceeded expectations, it marks the smallest increase in over a year. The company now faces pressure to demonstrate to investors its strategy for sustaining growth in the coming years, especially as its extensive reach makes acquiring new subscribers increasingly challenging.
The password-sharing crackdown, introduced in 2022 alongside a new ad-supported streaming option, initially sparked a wave of growth. Since last year, Netflix has gained more than 45 million new members, bringing its global subscriber count to an impressive 282 million.
While the ad-supported plan, Netflix's most affordable option, accounted for 50% of new sign-ups in available markets during the most recent quarter, the company cautions that it's still in the early stages. Netflix does not expect advertising to significantly drive growth until next year.
Despite this, Netflix reported strong financial performance for the July-September period, with revenue up 15% compared to the same period last year, reaching over $9.8 billion. Profits also saw a substantial increase, rising from $1.6 billion to $2.3 billion year-over-year.
The company's pricing strategy varies by region, with its last price increase in the UK and US occurring in 2023, affecting only certain plans. The popular "standard plan" without advertisements has remained unchanged since 2022 in these markets.
Industry analysts suggest that Netflix's robust financial position allows it to continue investing in new content creation, a critical factor in justifying price increases without alienating subscribers. As streaming competition intensifies, the ability to offer fresh, compelling content, including potential forays into sporting events, could give Netflix the edge it needs to raise prices while retaining and attracting customers.
As Netflix navigates this new phase of growth, the company's pricing decisions and content strategy will be closely watched by both investors and consumers in the evolving streaming landscape.