When streaming industry pioneer Netflix (NFLX.O) releases earnings on Wednesday, it’s anticipated to lay the groundwork for price rises following its crackdown on password-sharing, which likely increased members by approximately 6 million in the third quarter.
To reach the more than 100 million users who use its service without subscribing, Netflix, the only profitable major streamer, has restricted password sharing outside of homes rather than raising ad-free fees this year like rivals like Walt Disney (DIS.N).
According to Bernstein analysts, Netflix now resembles a utility in several areas. “The challenge of being labeled a utility is how a maturing company continues finding growth.” After the Hollywood actors’ strike is over, it could raise costs, according to a media story from earlier in October.
The Writers Guild of America (WGA), five months after announcing a strike that rocked Hollywood, last week ratified a new deal with major studios.
On the other hand, Netflix has fared the strike well because of its broad worldwide reach and robust content offering.
Analysts predict that Netflix may increase the price of its ad-free alternatives in the upcoming months to move more members to the other tier, where ads help bring in more income per user after the ad plan announced last year had a sluggish start.
According to observers, since the password crackdown, most Netflix subscribers have chosen the ad-free packages. The monthly cost of the ad-supported basic plan is $6.99, while the prices for ad-free plans start at $15.49. According to Insider Intelligence analyst Ross Benes, Netflix will probably treble its ad-supported viewership next year if it uses these strategies. Over time, he anticipates Netflix will increase its user ad exposure to catch up to competitors.
According to projections by Visible Alpha, the ad tier would generate around $188.1 million in income during the third quarter that concluded in September, with 2.8 million new subscribers. According to LSEG statistics, Wall Street anticipates the streamer to have its greatest quarterly subscriber gains this year.
The current seasons of “Sex Education” and “Virgin River” were among the high-quality programs that helped the third quarter’s revenue rise 7.7% to $8.54 billion, the biggest gain in five quarters.
