© Reuters. Netflix (NFLX) considers raising prices after actors strike ends – WSJ
Netflix (NASDAQ:) is planning to raise the price of its ad-free streaming service after the ongoing Hollywood actors strike concludes, according to the Wall Street Journal.
While specific details of the price increase, including the amount and timing, have not been disclosed, discussions are expected to begin in the U.S. and Canada.
This move follows a broader trend in the streaming industry, where major ad-free services have increased prices by approximately 25% in the past year to improve profitability and encourage users to switch to cheaper ad-supported plans.
Netflix has been one of the few major streaming platforms that did not raise its prices over the past year. Instead, the company focused on increasing revenue by cracking down on password sharing.
The decision to raise prices is likely a response to the rising costs associated with labor agreements reached during the ongoing Hollywood strikes. The Writers Guild of America recently reached a tentative agreement with studios, and negotiations with the Screen Actors Guild, which went on strike in July, have resumed.
Netflix’s move to raise prices is expected to occur once the strikes have been resolved, and it is part of a broader industry trend aimed at managing increased talent costs resulting from these labor agreements.
“While we already expected a price increase sometime in 2024, based off comments from 2Q earnings, a 4Q hike would be sooner than expected,” Oppenheimer analysts commented.
“The price increase should increase ARM (rev/sub), either driving more subs to higher ARM ad-tier relative to ad-free Standard plan, or by increasing ad-free ARM. Either way, NFLX should be able to report higher revenue, after disappointing investors, with the stock -21% vs. NASDAQ’s -9%, since reporting 2Q earnings on 7/19.”
The streaming giant has also modified its pricing tiers, discontinuing its basic ad-free tier in the U.S. and expanding the price gap between its standard ad-free plan and its ad-supported tier.