Yesterday, Netflix jacked up its US monthly subscription prices by $2/month, the largest increase in the company’s 12-year history.
As other platforms grow, the baron of binge is doubling down on its original strategy of getting people hooked on hot original content and then upcharging them.
‘Stranger Things’ and ‘The Crown’ aren’t gonna pay for themselves
Netflix has committed $18.6B to producing the best (and the most) content, resulting in more than $14B in debt.
Netflix had $2B in negative cash flow last year, and it’s not slowing down: Executives expect Netflix’s cash flow deficit to increase to $3B next year.
But Netflix is betting that all of that content is good enough to keep its 58m US viewers around, even as it increases prices by 13-18%. By raising its prices by $2, Netflix will instantly dial up annual revenue by close to $1.39B.
The streaming wars are just getting started
Netflix is the most popular TV-viewing option, beating out cable, broadcast, TV, and all other streaming platforms.
But, other streaming platforms are investing heavily to catch up: Amazon, HBO and Hulu are both growing, and Disney, WarnerMedia, and NBCUniversal are release streaming services in the next 2 years.
Even after the increase, Netflix’s basic plan will be $8.99/month, cheaper than both HBO ($14.99) and Hulu ($11.99). After Netflix announced its new pricing, its stock rose more than 5%.
