Stop me if you’ve heard this before, but another Netflix price hike might be in the works. Or so Netflix just warned.
Netflix has recently increased the prices of two ad-free tiers, and one of them is about to be retired. The Basic plan is going away in the second quarter of 2024, starting in the UK and Canada. Netflix announced the news earlier this week during its earnings report for the fourth quarter of 2024.
The move means existing Netflix subscribers who are still on the $11.99 Basic plan will have to downgrade to the ad-supported $6.99 plan or upgrade to the ad-free $15.49 plan. The goal of all of this is for Netflix to make more money so it can improve the content it offers… or so Netflix says. And it’s very clear that some of the original Netflix content needs improving.
Here’s a blurb from Netflix’s letter to shareholders:
As we invest in and improve Netflix, we’ll occasionally ask our members to pay a little extra to reflect those improvements, which in turn helps drive the positive flywheel of additional investment to further improve and grow our service.
The quote is ambiguous, as it offers no indication of Netflix’s plans for more price hikes. Compare it to the quote that mentions the retirement of the Basic plan, where Netflix is more specific:
In Q4’23, like the quarter before, our ads membership increased by nearly 70% quarter over quarter, supported by improvements in our offering (e.g., downloads) and the phasing out of our Basic plan for new and rejoining members in our ads markets. The ads plan now accounts for 40% of all Netflix sign-ups in our ads markets and we’re looking to retire our Basic plan in some of our ads countries, starting with Canada and the UK in Q2 and taking it from there.
Which Netflix plans might see price hikes?
Netflix raised the prices of the ad-free Basic and Premium plans by $2 in mid-October. They now cost $11.99 and $22.99 monthly, respectively. The ad-free $15.49 Standard plan stayed unchanged. Also, Netflix kept the ad-based $6.99 Standard plan. The latter got a few significant upgrades, like support for Full HD shows, downloads on mobile devices, and multiple streams. It’s on par with the Standard plan now.
Does this mean the ad-based and the ad-free Standard plans are in for price hikes in the not-too-distant future? Netflix wasn’t specific, so it’s unclear. I’m just presenting the facts, so you know where you stand. There’s a very good chance that those two plans will see price increases since they were spared in the last round of price hikes.
Once the second quarter of the year arrives, you’ll have to decide what Netflix subscription to get instead of the Basic one that’s going away. I’d say the way subscribers react to Netflix’s move might influence what Netflix does next.
On one hand, Netflix might want people to downgrade from the ad-free $11.99 plan to the ad-based $6.99 one. That’s $5 in savings for the customer, but Netflix might make more money from ads. If that’s not the case, things will likely play out differently. After all, this is nothing short of a money grab from Netflix.
You probably won’t cancel
As it touts the increasing number of Netflix subscribers who opt for the cheaper ad-based plan, Netflix also acknowledges that it has a lot of work to do for its ad business to bring in more revenue.
With that in mind, I wouldn’t be surprised if Netflix starts charging more for its Standard plans, regardless of whether or not they include ads, in the future. That’s just speculation, however.
Won’t Netflix subscribers cancel the streaming service once another price hike rolls out? Yes, some will. But the majority of users will likely just cough up more money.
The recent quarterly earnings report showed Netflix adding 13.1 million net subscribers. That was “stronger than anticipated,” and Netflix’s “largest Q4 ever.” Keep in mind that Netflix rose prices during the quarter.
As for 2024, Netflix expects “healthy double-digit revenue growth” for the full year:
We enter 2024 with good momentum. We expect healthy double digit revenue growth for the full year 2024 on a F/X neutral basis driven by continued membership growth as well as improvement in F/X neutral ARM as we adjust prices. We’ll also continue to invest in and build our ads business; we expect strong growth in 2024 but off a small base so it’s not yet a primary driver of our overall revenue growth. Our aim is to make ads a more substantial revenue stream that contributes to sustained, healthy revenue growth in 2025 and beyond.
So yes, someone will have to pay for that double-digit growth. And that someone is you and I.