Netflix hikes prices as its lead widens over other streaming services

Netflix has raised its prices after gaining a record 41 million subscribers last year.

The world’s largest streaming service said Tuesday that it had raised subscription rates for most plans in the United States, Canada, Portugal and Argentina. For U.S. users, Netflix’s ad-supported plan increased from $6.99 to $7.99 monthly, while a standard subscription has increased from $15.49 to $17.99. The platform’s premium ad-free plan - which allows four users to stream concurrently - went up by $2, to $24.99 per month.

Also Tuesday, Netflix announced annual operating income that exceeded $10 billion for the first time in its history, on the back of year-on-year revenue growth of 16 percent.

Wall Street cheered the news, with the company’s stock price gaining about 12 percent by midmorning Wednesday.

Netflix added 19 million paid subscribers in the fourth quarter of the year - buoyed, it said, in part by the recent release of the second season of “Squid Game” and a push into live sports, including NFL games and the internet-viral boxing match between Mike Tyson and YouTuber-turned-boxer Jake Paul.

Netflix’s massive scale allows it to buy more high-dollar material, making it harder for other services to compete, Evercore ISI analyst Mark Mahaney said.

“For [Netflix] to raise prices across all of their plans, they must be really confident that it’s not going to lead to a consumer backlash,” he said.

Netflix raised prices in its other international markets in the past couple of quarters without problems, co-chief executive Greg Peters said. “Those changes have gone smoothly,” Peters said. “We certainly expect the same for these latest changes.”

At $7.99 monthly, the ad-supported plan still represents “a highly accessible entry point,” Peters said. The cheapest monthly plans for some of the largest streaming services other than Netflix include $8.99 for Amazon’s Prime Video, $9.99 each for Disney Plus and Max, and $7.99 for Paramount Plus.

Disney Plus, Paramount Plus and Max sometimes give discounts to new or returning users, especially during the holiday shopping season, while Netflix rarely does. And some services, including Netflix, are occasionally offered as part of a bundle.

Don’t expect Netflix’s price hike to prompt rivals to do the same, Wedbush Securities Managing Director Dan Ives said. Other streaming services instead will hold their prices steady and try to gain market share, he said.

Netflix “stands at the top of the mountain looking down at competitors,” Ives said in an email.

Netflix projected revenue of between $43.5 billion and $44.5 billion for 2025, equating to growth of about 12 percent to 14 percent year over year - a significant reversal in outlook from recent years, when some industry watchers had forecast decreasing stock values after the company reported a decline in subscribers in 2022 for the first time in a decade.

As the market for streaming services has grown increasingly crowded, Netflix has sought to maintain its position by cracking down on password sharing, diversifying its products with a cheaper ad-supported plan and making a foray into mobile gaming.

The company is an undisputed leader in streaming video, with 302 million paying subscribers.

By comparison, Disney reported 123 million global subscribers for its Disney Plus Core service at the end of September, the most recent period for which figures are publicly available, and an additional 35 million subscribers for Disney Plus Hotstar, a joint venture in India. Hulu, which is owned by Disney, had 51 million paid subscribers.

Amazon reported over 200 million monthly viewers for Amazon Prime. (Amazon founder Jeff Bezos owns The Washington Post.) Warner Brothers Discovery said in its latest quarterly report that it had more than 110 million subscribers across its services, which include Max and Discovery Plus.