After releasing a solid third-quarter earnings report, Netflix executives announced that the biggest concern for most investors (but certainly not for subscribers suffering from inflation) is “When will they raise prices in the U.S.?” ?” answered the question.
“Our approach to pricing has been remarkably consistent over the years,” said co-CEO Greg Peters. “Our basic theory is that we need to work really hard to ensure that we deliver more value to our members every quarter. Then, through metrics like engagement, acquisition, and retention, , evaluate it based on how it is and decide if you’ve done a good job there. If so, how do you actually deliver on your promise to deliver more value? We may ask our members to pay a little more so we can invest it forward and continue the whole process.”
Netflix has raised prices on various plans six times in the U.S. and Canada since 2015, most recently in 2023. As the streaming space becomes more crowded, startups are also raising prices, especially for ad-free standalone services. . Apple TV+, which launched in November 2019 at $5.99 per month, has nearly doubled to $9.99. “Stream flation” also occurred when the prices of consumer goods such as food rose 30% over the past two years, but inflation has fallen significantly in recent years.
Peters spoke on a video call focused on quarterly results, but did not provide any specific schedule for the U.S. In a recent format change, Netflix has made its video earnings calls live events, allowing analysts to The previous settings for moderators have been abolished. Phone calls and questions to Pepper executives. Currently, Spencer Wang, Vice President of Finance, Investor Relations and Corporate Development, leads the quarterly conversation, quoting the analysts who submitted the questions and reading out the questions.
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Taking the topic of pricing seriously, Wang said the inquiry came from Rich Greenfield of Lightshed Partners and was one of three mentioned to him during the call. He said that. Wang said Greenfield was particularly interested in why the company wasn’t considering raising prices in the very short term, given the strength of its content plans for the end of 2024 and into 2025.
As other executives laughed at the topic of pricing, Peters joined in the laughter, joking, “I’m going to invite Rich to be on the pricing committee.” CFO Spence Newman later quipped that he was “silent” throughout the conference call because he was busy “getting off the pricing committee” to make room for Greenfield.
Another analyst asked about the difference between the ad-supported basic tier, which costs $6.99, and the most popular service level, Standard, which will cost $15.49 in 2022. Peters said the cheaper plan “represents incredible value” and the company plans to continue. We offer a wide variety of plans. “Every plan needs to be on the roster,” the co-CEOs said. “We need to provide sufficient value to consumers” without “increasing complexity” and creating consumer confusion.
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Beyond the U.S., Peters acknowledged there are “several other countries” where the company has recently increased prices. The executive noted that the company frequently tests price changes to gauge consumer reaction before rolling them out more broadly.
In its quarterly letter to shareholders following its results, Netflix said it had recently increased prices in Japan as well as parts of the EMEA region. He added that prices will increase in Spain and Italy starting tomorrow.
