What you need to know
- Netflix today announced its fourth-quarter 2023 financial results, and also released a letter to shareholder.
- There was also a live interview with co-CEOs Ted Sarandos and Greg Peters, as well as the company’s financial leaders, streamed and posted to Netflix’s Investor Relations YouTube channel.
- In the letter, Netflix shared its financial goals for 2024, which include price hikes.
Be prepared to pay more for Netflix in 2024 and maybe every year after that. On Tuesday, the company released its fourth-quarter financial results for 2023 and provided a letter to shareholders. Within the letter, Netflix said it plans to continue raising the prices of its plans going forward.
“As we invest in and improve Netflix, we’ll occasionally ask our members to pay a little extra to reflect those improvements,” the letter said. “Which in turn helps drive the positive flywheel of additional investment to further improve and grow our service.”
As the company’s own words layout, Netflix price hikes aren’t related to any one factor. Reasons that a streaming and production company like Netflix might need to raise prices are inflation or higher data center costs, but these line items aren’t specifically mentioned. Instead, Netflix phrases its statement to investors in a way that suggests it will continually raise prices so that end users subsidize investments.
Netflix has begun an effort to push customers to either more expensive or ad-supported plans. The cheapest ad-free plan, the Standard plan, now costs $15.50 per month. That’s because the company’s Basic plan is being phased out for new and returning customers, per the letter and Netflix’s plans and pricing page. Current subscribers to the Basic plan can keep their plan until it is changed or canceled by the user.
The Standard with Ads plan costs $7, which means it is less than half the price of the cheapest ad-free plan. That gap has never been greater, and it is intentional. Aside from raising plan prices to match investments, Netflix also wants to push people to its ad-supported plans.
“Scaling our ads business represents an opportunity to tap into significant new revenue and profit pools over the medium to longer term,” Netflix said in the letter. “On the advertiser side, we continue to improve the targeting and measurement we offer our customers.”
Password and account sharing is still on Netflix’s mind, but the company thinks it has “successfully addressed account sharing.” It says “many millions” of users have shifted to Transfer Profile and Extra Member features,” but didn’t provide concrete numbers.
It appears that Netflix users will be expected to pay more for the company’s ongoing investments, even if those users don’t take advantage of them. For example, Netflix is paying $5 billion to air WWE Raw on its streaming service for a 10-year period that starts next year. That $5 billion has to come from somewhere, and deals like this one could be a factor in future price increases.
Regardless of whether a Netflix user cares about WWE Raw, they might be forced to pay for it if the company’s letter is any indication. This is a different approach to how other streaming services, like Hulu, tackle live programming. Hulu has different tiers for live sports and entertainment, so users can choose whether or not to pay for it.
While we don’t know the exact details, Netflix is saying that price hikes are a matter of when — not if.
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