Netflix: streaming service increases prices

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Netflix feels so secure after its successful crackdown on password freeloaders that the service is allowing itself price increases. Initially, some subscription options in the U.S., France and the U.K. will become more expensive. The confidence is due to the strong push in the last quarter: the crackdown on password sharing and the cheaper subscription with ads boosted the customer base by 8.76 million.

Investors are rewarded
Investors were delighted: the share rose by more than twelve percent in after-hours trading on Wednesday and a good 13 percent in pre-market trading on Thursday morning.

Now, money is due.
Since the summer, Netflix has been cracking down on users sharing an account beyond one household. For this, additional money is due: either the co-users pay for their account or the previous account holder adds them as an additional member for 4.99 euros per month.

100 million shared passwords
Earlier calculations by Netflix indicated that approximately 100 million people had access to another household’s password. The crackdown on account sharing carries a high risk because irate users may switch to one of the numerous streaming services that rivals provide. Netflix, however, is banking on the fact that its range of series and movies is so attractive that people would rather pay more. This calculation seems to be paying off despite the challenging economic environment in many countries. At the end of the quarter, there were 247.15 million paying subscribers to Netflix.

Third, it wants cheaper subscriptions with ads.
Like the previous quarter, Netflix had anticipated an increase of about six million subscribers for the most recent quarter. The cheaper subscription with advertising plays an important role here: 30 percent of new customers opt for it in the countries where it is available. Overall, the number of customers with advertising subscriptions has risen by 70 percent within three months. For the current quarter, Netflix expects an influx of customers on par with the third quarter.

According to Netflix, the free-rider hunt’s effects would be felt for several quarters: So far, some measures have not even reached some user groups, he said. Co-CEO Greg Peters downplayed the possible effect of the price increases: Something like that is more likely to be reflected in the shares of new subscriptions.

Netflix leads in the streaming industry
Netflix currently dominates the streaming business and is breaking away from the rest of the industry, said industry analyst Rich Greenfield on CNBC. He cited Skydance Animation, run by former Pixar star John Lasseter, moving its movies from Apple’s streaming service to Netflix as a crucial step for the future. He said that could help Netflix catch up with Disney in family entertainment.

Greenfield pointed out that the subscription with ads is doing well because many users who previously watched Netflix with passwords from friends or family members opted for it. With its ad offering, Netflix is increasingly targeting advertising dollars that previously flowed to linear TV.

Netflix revenue rose eight percent year-on-year to $8.54 billion (8.08 billion euros), Netflix said Wednesday. Profits grew by about a fifth to around $1.68 billion.