So far, the majority of new Netflix subscribers, following the successful crackdown on password sharing, have shown a preference for the ad-free plans, according to analysts. The standard plan, which includes ads, is priced at $6.99 per month, while ad-free plans start at $15.49. Netflix’s robust action against password sharing likely contributed to an increase of approximately 6 million subscribers in the third quarter. The streaming giant is anticipated to lay the groundwork for potential price hikes when it releases its earnings report on Wednesday.
Being the only profitable major streaming service, Netflix has refrained from following in the footsteps of competitors like Walt Disney, who raised prices for their ad-free plans this year. Instead, Netflix opted to address password-sharing beyond households, targeting the over 100 million users who access its service without subscribing.
Analysts at Bernstein have noted that Netflix is increasingly resembling a utility in many markets, posing the challenge of sustaining growth as a mature company.
There is a possibility of price hikes after the resolution of the Hollywood actors’ strike, as reported in October. The Writers Guild of America (WGA) reached a new contract agreement with major studios, five months after initiating the strike, which Netflix managed to weather successfully, thanks to its extensive international presence and strong content offerings.
While the ad-supported plan had a slow start when introduced last year, analysts predict that Netflix will increase the prices of its ad-free options in the near future to incentivize more subscribers to opt for the ad-supported tier, which generates higher revenue per user.
According to Insider Intelligence analyst Ross Benes, through these strategies, Netflix is likely to double its ad-supported viewership next year. The ad-supported tier is expected to generate approximately $188.1 million in revenue in the third quarter, with an estimated 2.8 million new subscribers, as per Visible Alpha estimates. Overall, Wall Street anticipates that the streaming platform will report its most robust quarterly subscriber additions this year, with third-quarter revenue likely growing by 7.7% to reach $8.54 billion, marking the fastest growth in five quarters, owing to strong programming, including the latest seasons of “Sex Education” and “Virgin River.”
