Netflix Likely to Raise Prices in the US After Ad-Supported Tier's Success in Driving 50% of New Subscribers

Analysts now expect Netflix to raise prices in the US next year.

By Thea Felicity

Oct 18 2024, 10:09 AM EDT

Netflix's Password Sharing Crackdown Backfires With Slow Subscriber Growth in Q2 — This illustration picture taken on July 24, 2019 in Paris shows the logo of the US Online Streaming giant Netflix logo application on the screen of a tablet. MARTIN BUREAU/AFP via Getty Images

Earlier this year, Netflix's password-sharing crackdown slightly backfired. But the streaming service was able to turn the tide around with their new tiers recently announced a couple of months ago.

With the ad-supported tier, Netflix did not just see a 6% increase in its shares. Investors were also optimistic about its continued subscriber growth.

Through this development, Netflix's market value is expected to increase by $18 billion, which according to Reuters, will bring the overall value to $295 billion. In the recent quarter, Netflix exceeded estimates on its subscriber growth by over 1 million more. But the success does not end here as they also expect more sign-ups in the next three months, especially with Squid Game's Season 2 on December 26.

Following the positive results, over 5 analysts also raised their price targets for Netflix's stock, to $750, from $706.38. This year, Netflix outperformed Disney by 41.2%, while Warner Bros. suffered a 31% fall.

How Netflix Boosted Subscriber Growth

In Q3, the streaming service brought in 5.1 million subscribers. This is lower than the 8.76 million additions from last year's similar quarter. Slowdown is anticipated, but Netflix has already implemented strategies to turn this around.

Recently, MarketWatch reported that Netflix employed price hikes in Africa, Japan, the Middle East, and other parts of Europe. They are also expected to do the same in Italy, Spain, and the US, next year.

Now, Netflix has yet to announce the upcoming price increases, especially in the US. However, the rising user engagement will encourage the streaming service to uphold future hikes. To be specific, the US supported Netflix's ad tier. This accounted for over 50% of new sign-ups, especially in countries where it's available.

Looking ahead, Netflix does not expect this tier to be a major growth driver in the following years. Instead, they're counting on popular content to attract more subscribers, like the latest season of Stranger Things.