Netflix is getting people to pay for it

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Netflix reported strong third quarter results this week, and along with this news announced something consumers have come to expect: The company would be raising prices again.

As our chart of the week shows, the company has been hiking prices since 2014 at fairly regular intervals. Its Premium plan will now cost $22.99 per month; as recently as 2019, this could be had for less than $15/month.?

And in addition to price hikes across its Standard and Basic plans, the company also rolled out a new ad-supported tier late last year — a new tier that has driven its subscriber growth and had Wall Street cheering earlier this week.?

According to Netflix, ad-tier subscribers rose 70% compared to last quarter and, in countries that have an ad tier, these cheap subscriptions now represent around a third of new signups.

And the company’s ability to drive price increases appears to have analysts even more bulled up on newfound subscriber growth, which the models can turn into accelerating top-line revenues in the years ahead.?

"Of all the new data points, we think the biggest surprise is the immediate and substantial price hikes," MoffettNathanson analyst Michael Nathanson wrote in reaction to the report on Thursday.

Like many tech stocks, Netflix had a rough first half of 2022 as the stock lost more than two-thirds of its value. To turn things around, the company announced a campaign to crackdown on password sharing.

But the ad-supported tier soon followed, offering people the chance to pay less and still get their Squid Game and Drive to Survive.

Or in many cases, pay for the first time if they suddenly found that their ex-girlfriend’s uncle’s password was no longer working.

And after the company’s results this week, it appears to have been a very savvy move.

— Ethan Wolff-Mann, Senior Editor at Yahoo Finance