Netflix has bumped up the price of two of its subscription tiers in the U.K. the U.S. and in France.
The video streaming service now charges £7.99/$11.99 a month to subscribe to its “basic” plan, which is no longer offered to new customers, and £17.99/$22.99 for its “premium” tier. French Netflix viewers will also have to pay more, but the price of its “basic with ads” and “standard” plans will remain unchanged in all three countries, the BBC reported.
The price hike on the premium tier represents a £2 a month increase. Subscribing to this tier allows users to watch Netflix on multiple devices and view content in higher quality with Ultra HD.
Netflix had previously increased its prices in the U.K. in March 2022, just over 18 months ago, at a time when it was trying to balance its revenue amid a drop in subscribers. However, things appear to be very different today, with Netflix saying it added 8.8 million subscribers globally to its user base in its most recent financial quarter. Analysts say the increase stems from Netflix’s decision to begin charging users to share their accounts with people who live outside of the specific address they provide. For instance, students living away from home would often use their parents’ account at their new location, but this kind of arrangement now costs extra.
In a letter to its shareholders, Netflix explained that it had previously paused price rises as it rolled out its paid sharing functionality. However, it said its approach remains the same, namely to offer a range of different prices and plans to suit different users. As it delivers more value to subscribers, it occasionally needs to ask them to pay more, the company explained.
"We want to sustain that virtuous cycle because when we partner with the best creators, we can delight our members, invest more in amazing TV series, movies and games and build an even more valuable business,” Netflix said in its letter.
Since launching its basic with ads tier, Netflix has been trying to entice more customers towards that option, because it believes the cash it receives from advertisers has enormous potential to drive greater profits. By bumping up the price of its basic tier, it’s likely that many will consider switching to save some money.
Simon Gallagher, a former director of content acquisition at Netflix, told the BBC that the company is “certainly generating more revenue from the ad-tier subscribers” than any other tier. "So they are very motivated to push their subscribers across to that ad-funded tier,” he stated.
As such, analysts are warning customers that they could soon see much higher prices in the coming years, with Netflix looking to protect its revenue and profits while reckoning with higher costs from licensing and its content production initiatives.
"Price rises are inevitable and we can expect this most likely on an annual basis, akin to traditional pay TV and other services," said Paolo Pescatore, an analyst at PP Foresight.
