Deadline reports that Netflix has raised its price for subscriptions across the board for the second time within 14-month span, and most of Wall Street is happy with the move. This renewed confidence in the streaming giant comes shortly after the mergers and acquisitions team was unable to secure a deal to acquire Warner Bros and Discovery.
The price hike will see a $1 increase for all standard subscriptions with ads. There will also be a $2 hike for both Standard Ad-free and Premium 4k tiers. The streamer is now focusing on purchasing live events like MMA bouts, WWE Raw, and MLB Opening Day, and maximizing pricing power through increased revenues from existing users.
The move has been lauded by most of Wall Street, with Bernstein’s Laurent Yoon, who has given the streamer a very sunny outlook with an “outperform” rating on its shares, weighing in on the issue. He claims the new hikes are “good news” and went as far as to say they are a “welcome relief for investors.”
Not joining in on the celebration is Needham & Co., which predicted earlier this year as reported by Investing, that Netflix would hit a “growth ceiling” and be forced to raise prices in the first quarter, just as they did. They dropped their target price from $150 to $120 as fears of “streamflation” begin to swirl. They are worried that once prices reach $20 a month or more, subscribers will begin hopping between services, only purchasing subscriptions for a month at a time to watch the shows they want. This could then erode Netflix’s leading engagement numbers as loyal subscribers look for cheaper alternatives.
Many of those premium-tier subscribers may look to downgrade to the ad-based model, which would save them a whopping $11 a month. Netflix’s hopes to fill in that gap with ad based revenue, but not everyone is convinced it will be an easy mission. Matthew Dolgin, a senior equity analyst for Morningstar, went on record to say, “A larger ad-supported base bolsters advertising sales opportunities,” he wrote, “but those must also make up the $11 per subscriber per month headwind versus ad free.”