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Credit: ITMThe year of 2007 was a simpler time during the age of television. The writers strike had yet to happen, Disney+ was still just a sparkle in Bob Iger’s eye, the star of Even Stevens became a blockbuster movie star, and the mail-only DVD movie company, Netflix, created an internet streaming service. Since then, Netflix has become the in-demand heavy hitter within the film industry. Yet, despite its massive financial gains, the company will plan to raise prices yet again for its users.
One of the primary reasons Netflix has continued to raise their prices is they claim it is to maintain their influx of original content. They stated that their global spending exceeded $230 billion in 2022. Even with this astronomical investment in programming, they are still third next to Disney and Comcast.
Netflix no longer has a monopoly on streaming content. Due to rivals like Disney+, Max, Apple TV+, Paramount+, and Prime Video, the company had to initially increase subscription fees so they could keep generating more and more content. Executives believed that creating more programming diversified the platform, therefore would attract and maintain a wider audience.
The titan of streaming was not proven wrong as Netflix kept more than 200 million subscribers after the first significant price increase. Then a new problem arose where the company was not losing a lot of subscribers, but there were not any new ones. So without a growth in subscribers, there would be no substantial growth in revenue. Netflix determined a prominent reason for the lack of new subscribers was due to the rampant use of ‘password sharing.’
This crackdown was enacted in July 2023 and proved fruitful. Netflix was able to add 2.6 million new accounts, even after charging password sharers an extra $7.99 per month. Additionally, the company saw a 23% increase when they introduced an “ad supported plan” where subscribers could receive a more economical $7 a month package in return for paid ads that played in between content viewing.
The success of these recent tactics have given the platform goliath the confidence to raise prices once again. Currently, an ad-free standard package is $15.49 a month, the ad-supported package is $6.99 and the premium plan is $19.99 a month. While it is unclear how much the prices will increase, the reason why is Netflix tacitly blames the writers and actors strikes.
Writers won big from their strike. However, since all of their demands were met such as an increase in wages, overall residuals and A.I. compensation, those calculations will take more money out of the pockets of major studios like Netflix by 0.2% annually. This does not even include how much actors will soon receive once the actors strike reaches its inevitable end. So Netflix is waiting until the Screen Actors Guild (SAG) contract is finalized to implement their new subscription increase.
All businesses have to adapt to inflation and changes to economy to survive. However, the reasoning behind this impending fee increase struggles to muster validity for many critics. Mainly because Netflix used a legal accounting loophole to only pay 1.1% in corporate income tax based on their $5.3 billion profits in 2021.
What do you think of Netflix increasing their fees again? Is it justified or are they using the strikes as an excuse?