Netflix subscribers may want to brace for a price increase as it is expected that the streaming service will be increasing its cost once again. The company most recently raised its prices back in 2019, with its most popular plan going up by $2. Now, an analyst has revealed that They are anticipating further price increases in the U.S. and abroad.
Alex Giaimo of Wall Street firm Jefferies recently shared a note with the company's clients. In it, Giaimo noted that there was a shift in tone between Netflix's earnings calls in the first quarter and second quarter of 2020. With a third-quarter earnings call scheduled for next month, Jeffries revealed that they expect an announcement could be imminent. The note, in part, reads as follows.
"After a change in language regarding pricing on the (second-quarter) call, we believe a potential hike is probable in the near to midterm. In Q1, Netflix said that they were 'not even thinking about price increases,' while the Q2 language was more open-ended."
Most of Hollywood has been hit extremely hard in 2020 with ongoing health and safety concerns keeping movie theaters largely out of play. Plus, productions have had a hard time getting up and running again en masse. Meanwhile, Netflix has thrived, with many people stuck at home with little else to do. The company added 26 million subscribers in the first half of the year and is dangerously close to 200 million worldwide. The company's most popular plan currently runs $13 per month.
It seems the company's tone changed between March and July 2020. With the increased customer base, they seem to be more open to a price hike. Should Netflix raise its rates, it would mean a lot more money in the bank. It's estimated that a $1 to $2 increase in North America or Europe could bring in between $500 million and $1 billion in 2021. Alex Giaimo expects an increase in that ballpark will most likely go into effect in Europe, Middle East and Africa, which would bring in an estimated $700 million in revenue next year.
This comes as the streaming marketplace has become far more crowded. Disney+ and Apple TV+ launched last year, with HBO Max and Peacock entering the fold this year. Consumers now have more options, with Hulu Amazon Prime Video and others also available. But Netflix remains the king of the hill, with everyone else battling it out for second place. Though there is one key difference.
Netflix does not run ads on its platform. Not only that but Reed Hastings recently offered some assurance that they never intend to go that route. So, outside of courting new subscribers, the only way to increase revenue is to raise prices. While an increase would mean some subscribers would probably leave, the additional revenue from those who stick around would probably more than make up the difference. Netflix is scheduled to report its third-quarter earnings on October 20, so we could know more in a few weeks. This news was previously reported by Deadline.