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Netflix Hikes Subscription Fees Ahead of Q4 Earnings Report

Jonathan Walker
Jonathan loves talking politics, economics and philosophy. He carries unique perspectives on everything making him a rather odd mix of liberal-conservative with a streak of independent Austrian thought.
Published: January 20, 2022
Netflix has raised subscription fees in the United States.
Netflix has raised subscription fees in the United States. (Image: Tumisu via Pixabay)

Streaming giant Netflix has increased its subscription prices for North American customers. For existing customers, the price increase will roll out gradually. Netflix emailed them 30 days prior to the change. 

For new members, the increased price will apply immediately. This is the first price increase in Netflix’s monthly subscription since October 2020.

On Jan. 14, the company announced that the price of the basic plan in the United States will rise from $8.99 to $9.99; the standard plan will rise from $13.99 to $15.49 per month, and the premium plan will go from $17.99 to $19.99. In Canada, the basic plan subscription has been left as is at C$9.99. However, the premium plan rose from C$2 to C$20.99.

“We understand people have more entertainment choices than ever and we’re committed to delivering an even better experience for our members… We’re updating our prices so that we can continue to offer a wide variety of quality entertainment options. As always we offer a range of plans so members can pick a price that works for their budget,” a Netflix spokesperson stated.

North America is Netflix’s biggest customer base with 74 million subscribers. In terms of revenue, the region contributed $3.3 billion in the third quarter, accounting for 44 percent of total global revenue. 

With the price increase, Netflix has now become more expensive than some of its competitors. For instance, Disney+ costs $7.99 a month or $79.99 per year. HBO Max charges $11.99 a month.

In an interview with the Los Angeles Times, Brett Sappington, vice president of consumer insights firm Interpret, stated that Netflix’s price increase is part of its need to increase revenue. If the company cannot boost revenue by increasing subscribers significantly, the only other alternative will be to increase the price of a subscription.

“I do believe that had to be in their mind that they believed that consumers would see them as either a comparable or even a higher value than HBO Max as they made that decision… I do think that they like the idea of having a premium position in the market,” Sappington said.

While Netflix is raising prices in North America, it is slashing rates in other markets to boost its subscriber base and market position. For example, the company cut down the monthly subscription in India by Rs. 50 ($0.67) to Rs. 200 ($2.68) in December for its various packages.

Netflix’s subscriber growth has been slowing down in North America since the company has been focusing on international growth. In the third quarter of 2021, Netflix added 4.4 million new users; only 1.6 percent came from North America. Fifty percent of the new subscribers came from the Asia-Pacific region.

For the international market, Netflix has an edge over its competition. By the end of last year, Netflix boasted 214 million subscribers. That’s compared to HBO’s 74 million, Disney+’s 118 million, and Hulu’s 44 million. Amazon Prime was the closest contender with 200 million customers. 

Netflix is due to report its fourth-quarter 2021 earnings on Jan. 20. The stock price is already down 10 percent this year. Writing for The Motley Fool, Parkev Tatevosian, an adjunct professor of Finance, predicts that the subscriber numbers might be a potential catalyst for any increase in stock prices. 

“In the nine months ended Sept. 30, Netflix has spent $12 billion on adding content to the platform. If Netflix hits its target of 8.5 million subs in Q4, it’s likely to increase its lead in the streaming industry. Furthermore, that will allow it to spend even more on content in the fiscal year 2022,” Tatevosian writes.