Once upon a time, HBO sold cable subscribers on the value of a premium paid channel with the slogan, “It’s not TV, it’s HBO.” Today, in an entertainment world dominated by at-home viewing, Netflix $NFLX is hoping its own prestige will justify the highest monthly price tag in the US among streaming companies.
On Jan. 14, Netflix announced its first price increases since 2020, which go into effect immediately for new subscribers and will be rolled out gradually (with at least 30 days’ notice) for existing customers. Here’s how prices will increase for each plan:
Price bumps have become routine for Netflix over the past decade, but the most recent one makes the streaming giant’s standard plan, at $15.49, just a hair more expensive than the $14.99 price tag for HBO Max. Hulu’s standard plan is $12.99 per month, Amazon $AMZN’s is $8.99, and Disney $DIS+ is $7.99.
“We understand people have more entertainment choices than ever and we’re committed to delivering an even better experience for our members,” Netflix said in a statement. “We’re updating our prices so that we can continue to offer a wide variety of quality entertainment options.”
There’s no question Netflix is spending a boatload on content: $17 billion this year, to be exact (pdf). But the price bump also reflects Netflix’s need to squeeze more revenue out of North America, where subscriber growth is getting weaker.
In the third quarter of 2021, just 1.6% of Netflix’s 4.4 million new customers came from the US and Canada, compared with 50% from the Asia-Pacific region, where the streaming giant is slashing prices. Investors will be scrutinizing this breakdown anew when Netflix reports fourth-quarter earnings on Jan. 20. Prolonged interest in Squid Game, a global mega-hit that debuted in September, may help with growth.
When it comes to reach, Netflix still has an edge over its competition: Toward the end of 2021, it had 214 million global subscribers, compared with 118 million for Disney+, 74 million for HBO and HBO Max, and 44 million for Hulu. (Amazon Prime is a little trickier; the company says 175 million of its 200 million Prime members streamed TV shows and movies last year.)
But some of those competitors are growing quickly, including HBO Max, and Netflix’s North America conundrum leaves it with an ambitious to-do list: Court larger audiences outside the US, continue the (expensive) quest for blockbuster franchises, and cultivate a reputation as the premier player in an increasingly crowded field.
“I do believe…that they believed that consumers would see them as either a comparable or even a higher value than HBO Max as they made that decision,” Brett Sappington, vice president of consumer insights firm Interpret, told the LA Times of the latest price hike. “I do think that they like the idea of having a premium position in the market.”
