Netflix has announced that it added 8.8 million new subscribers during the third quarter of 2023. This increase comes after the streaming service cracked down on password sharing and forcing former free riders to open their own accounts. The service now has roughly 247 million subscribers worldwide. The growth in subscriptions comes along with growth in revenue. The company saw its revenue increase by 8% to $8.5 billion.
For its next move, the company also announced it is increasing subscription fees on its lowest-priced and heist-priced ad-free plans. The lower tier plan will increase from $10 to $12 per month, while the higher tier plan will increase from $21 to $23. The price of the mid-tier plan will remain at $15.50 per month and the plan with commercials will remain at $7 per month. Rather than lose customers completely, Netflix believes most who do not wish to pay the higher prices will opt for the plan with advertising. Increasing these numbers will help the company increase their advertising revenue, while increasing the revenue for those who remain in their current plans. The higher revenues will allow the company to further invest in original content, which could also attract new subscribers.
Discussion Questions:
- Which of the determinants of elasticity would contribute to demand for Netflix being inelastic?
- How does creating original content affect the elasticity of demand for Netflix?
Sources| NPR: https://www.npr.org/2023/10/19/1207013682/netflix-raises-prices-premium-plan; Unsplash: Photo by Matoo.Studio on Unsplash