Netflix’s recent crackdown on password-sharing has likely contributed to the addition of approximately 6 million subscribers in the third quarter, positioning the streaming pioneer to consider price increases. Although Netflix has stood as the only profitable major streamer, it has resisted raising ad-free prices this year. Instead, the company has aimed to curb password-sharing beyond households to tap into the more than 100 million viewers who use its service without subscribing.
“Netflix now closely resembles a utility in many markets,” noted analysts at Bernstein. However, this utility status brings challenges, especially for a maturing company in finding avenues for continued growth.
The possibility of raising prices is expected after the end of the recent Hollywood actors’ strike, which saw the Writers Guild of America (WGA) approving a new contract with major studios.
Despite the turmoil caused by the strike, Netflix has weathered it effectively, thanks to its extensive international presence and strong content lineup. However, its ad plan, introduced last year, had a slow start. To encourage more subscribers to opt for ad-free options, analysts anticipate that Netflix will raise the prices of these plans in the coming months. So far, most viewers who subscribed to Netflix after the password crackdown have chosen ad-free plans. The standard plan with ads is priced at $6.99 a month, while ad-free plans start at $15.49.
“Using these tactics, Netflix’s will likely double its ad-supported viewership next year,” according to Insider Intelligence analyst Ross Benes. He predicts that Netflix will increase the number of ads shown to users over time to compete with its rivals.
The ad tier is projected to generate approximately $188.1 million in revenue in the third quarter, along with an estimated 2.8 million subscriber additions, as per Visible Alpha estimates.
Overall, Wall Street anticipates that Netflix will report its strongest quarterly subscriber additions this year, mainly due to robust programming, including the latest seasons of “Sex Education” and “Virgin River.” It is estimated that revenue in the third quarter grew by 7.7% to $8.54 billion, marking the fastest growth in five quarters.