Netflix just hinted towards a plan that may aggravate its users

If you’re sick of Netflix’s  (NFLX) price increases, prepare to get even sicker. Netflix has quietly hinted that more price adjustments could be on the way as it adds more “entertainment value” to its platform. During the company’s most recent earnings call discussing its first-quarter earnings for 2024, Netflix revealed that it doesn’t have a “set position” on a price ceiling.

“We don't have a set position on a ceiling,” said Netflix Co-CEO Greg Peters during the call. “I mean, sure, you can look at paid TV as potential markers for where people have spent before. But we really actually don't think of it so much is defined by that. We see it as an opportunity to continue the process that we've been working on, which is let's continue to try and invest wisely, add more entertainment value. And as we add more entertainment value, then, of course, we can go back to our subscribers and ask them to pay a little bit more to keep that virtuous cycle moving.”

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Peters also said that there’s “a lot of runway still ahead” when it comes to delivering more value and asking users to pay more for the content on its platform.

The last time Netflix hiked its prices was in October last year where users on its retired Basic plan saw their monthly bill increase from $9.99 to $11.99, and its Premium plan rose from $19.99 to $22.99.

MNTN CEO Mark Douglas doesn’t believe that Netflix will increase its prices in 2024 as the company already has booming revenue and profits, and if it chooses to do so, it will be a mistake.

“Price increases are a mistake,” said Douglas. “It’s very tempting because even a dollar increase, per month, multiplied by their scale is billions in revenue and profit. But I would hold that in my back pocket if I were Netflix to be backlog for future revenue and profit growth.”

In Netflix’s first-quarter earnings report for 2024, the company reported that it earned around $9.37 billion in revenue, which is about a 15% increase from the revenue it collected during the previous financial quarter.

In the report, Netflix also revealed that starting next year, it will stop reporting its quarterly membership numbers and average revenue per member as it claims that it is generating “substantial profit,” and that membership growth is no longer a strong indicator of its future potential. The company will, however, continue to announce any major subscriber milestones it may encounter in the future.

Douglas claims that the decision from Netflix to stop reporting on these numbers comes before it will start to see a slowed subscriber growth rate.

“Netflix subscriber growth rate is going to start to slow as they get most of their password sharers into paid subscriber plans,” said Douglas. “With the complexity of explaining that, it makes sense to take the subscriber numbers out of the conversation.”

Last year, Netflix cracked down on its users who were sharing passwords with individuals outside of their household. The company began charging users $7.99 a month to share their accounts with individuals who don’t live with them, which sparked backlash.

Despite the criticism, Netflix managed to accelerate its subscriber growth and profits since making the change. In its first-quarter earnings report for this year, Netflix revealed that it has around 269 million subscribers globally, which is a 16% increase from the roughly 260 million it reported during the fourth quarter of 2023.

"The business is running well. Surging subscriber growth that probably cannot be sustained. An almost solid balance sheet. Strong cash flows. The problem is probably in the valuation," Stephen Guilfoyle wrote for TheStreet Pro. "My short was early, which made it wrong, but the idea was not out of left field."

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