Whenever Netflix raises its prices — which happens almost as often as Ben Affleck falls in love with a celebrity — the company always gives the same reason. It needs extra money, you see, in order to continue investing in the kind of programming and products its 302 million subscribers demand. That’s how the standard monthly price for ad-free Netflix has jumped from $7.99 to $17.99 over the past 13 years, including a $2.50 jump just announced during the company’s latest earnings report. There’s still the $7.99 monthly plan, of course, but it includes ads, and it’s a dollar more expensive than it was a week ago.
But let’s be real with each other. Want to know why Netflix keeps raising its prices? Because it can. Because Netflix won. The rest of the streaming industry is competing fiercely for a limited pool of money, dealing with carriage disputes due to dwindling subscriber numbers, and panicking about the future of television. Netflix He is The future of television.
Over the past couple of years in particular, Netflix has gone from being a solid streaming service to a practically inescapable and almost irrevocable part of mainstream culture. I have developed a list of successful originals – Strange things, Wednesday, Squid game, Night agent If we’re being really generous — this at least gives it something approaching HBO-style appointment television. She’s proven, through things like the Bull/Tyson fight and the Tom Brady roast, that she can create cultural events out of almost nothing. She made it through a day of NFL games without a hitch and spent billions of dollars to get into WWE Monday Night Rawone of cable’s biggest ongoing successes, on the platform. And underneath it all, she’s built a huge library of reality shows, cooking competitions, and other TV shows that make up most of our TV viewership.
Netflix has gone from a solid streaming service to a practically unavoidable and almost uncancellable part of mainstream culture
Now, for the price of your Netflix subscription, you can get a collection of expensive movies, high-end TV shows, sports, and low-budget reality shows, all in one place. You don’t want it all, but you pay for it anyway. This, my friends, is called a cable bundle. This is still the best work the entertainment industry has ever created.
The average price of a basic cable subscription in 2006, the year before Netflix began streaming content over the Internet, was between $40 and $50. People watched approximately four hours of television per day, which means they probably watched about an hour of advertising each day. Today, services like YouTube TV and Comcast’s new news and sports package cost $70 or more and offer only live programming. Meanwhile, Netflix subscribers watch two hours of the service every day, across all these categories, and pay at least a tenth of the price. Many of them do not see any ads at all. Think about saving!
Netflix certainly sees it that way. said Greg Peters, co-CEO of the company This week’s earnings call He’s optimistic about Netflix’s “long-term monetization opportunity.” “We currently capture only 6 percent of the revenue opportunities in the countries and sectors we currently serve,” he said. “As we continue to improve the diversity and quality of our list of TV shows and movies, we are gradually expanding the offering with newer content types, and we believe we will be able to gradually increase this share every year.”
Translation: Netflix is here for your entire entertainment diet. And your entire entertainment budget.
Peters also said that as it looks at price increases, Netflix takes into account signals such as engagement, retention and acquisition. It all boils down to one simple question: Do you keep using Netflix when the price goes up? The answer, so far, has almost always been yes. And so prices continue to rise. It’s really that simple. It’s clear to Netflix that it could charge more — perhaps a lot more — and it’s unlikely anyone would leave. So of course it will go beyond limits.
The other way to understand the details of the pricing strategy is that Netflix would very much like to have that ad-supported plan. The company has repeatedly said that it makes more money by combining monthly fees with smaller ads than it does from the larger subscription price alone. A large percentage of new subscribers choose ads — about 55 percent last quarter — and Netflix has begun testing the exact amount existing subscribers will pay to keep Netflix ad-free. It is no coincidence that the ad-free price jumped two and a half times compared to the base price. And remember: Even if we all switch to ad plans, prices may still rise. Cable TV is expensive and Full of ads, Netflix sure loves this business model.
Netflix would very much like you to have this ad-supported plan
Netflix continues to indicate that its ambitions are growing, too. Ted Sarandos, the company’s other co-CEO, noted on an earnings call this week that the company is more open to live sports than ever, following the success of the NFL Christmas Games and the Ball/Tyson bout. The company is increasingly getting into video games as well, which represents another big part of many people’s entertainment budget. Netflix has even begun borrowing tactics from YouTube and TikTok, bringing creators like Ms. Rachel to the platform.
Netflix’s main competitor is sleep, said Reed Hastings, co-founder and former CEO of Netflix. To be fair, sleep is still a very powerful market force. YouTube continues to be a dominant force in people’s video viewing experience. But Netflix has practically risen above everyone else — even its apparent competitors are now licensing their shows to Netflix because that’s where the viewers are, where the culture is.
The streaming wars have been messy, and they’re certainly not over, but Netflix has already won. The only remaining question is how rich the spoils of victory will be. And you better believe Netflix will find out.
