Netflix thinks about increasing the price of its subscription this year

It is expected that Netflix raises prices of its streaming plans in 2024, a move that should accelerate its revenue and profit growth as it continues to absorb a larger share of overall television viewing, according to analysts at UBS Securities.

“We expect to see rate increases this year” from Netflix, UBS analysts wrote. That, along with an increase in its ad-supported tier revenue and healthy subscriber growth, should push the company’s total revenue growth in 2024 to 15%, according to analyst estimates, compared with growth 7% in 2023.

Last October, Netflix increased the price of the Basic plan from $9.99 to $11.99 per month in the US ., and also raised tier prices in the UK and France. Netflix has not announced specific plans to increase subscription prices in 2024, but the Executives said rate increases are on the table.

Is the increase coming in Argentina?

On the company’s fourth-quarter 2023 earnings conference call, Netflix co-CEO Greg Peters noted that last year the streamer had “largely halted price increases” while implementing the shared payment program, “because we saw it as a form of substitute.” price increase. Now that we’re past that, we can resume our kind of standard approach to price increases. And price increases, you’ve seen us do it in the US, UK and France. Those changes were much better than we predicted.”.

Peters continued: “We will continue to monitor other countries and we will try to evaluate… when we have provided enough additional entertainment value” to “ask you [a los clientes] Let them pay a little more to keep that balance positive and we can invest in more great movies, series and games for those members. So, you know, the summary statement could be: ‘Back to normal.’”

Meanwhile, Netflix is ​​the “main beneficiary of structural changes in the media”, the analysts wrote in the note. Traditional media companies, as their linear television businesses have declined, have shifted their focus to the profitability of streaming. As the UBS team wrote: “The new playbook includes 1) price increases, 2) platform consolidation, 3) library preservation (with corresponding asset write-downs), 4) content spending cuts (adjusting for declines). related to strikes in 2023) and 5) a renewed focus on content licensing.”

“As the focus of streaming shifts from subscriber growth to profitability for traditional media companies, we see Netflix as the ultimate beneficiary of this industry rationalization,” the UBS analysts wrote.

Netflix’s future projection

Also on Tuesday, UBS raised its estimates for net Netflix subscriber growth in 2024 from 18 million to 20 million “to reflect continued momentum in subscriber trends, growth [de los ingresos promedio por membresía] and higher operating leverage.” The company added 29.5 million net new subscribers in 2023, up from an annual average of 21 million in 2020-22, as “successfully implemented” the paid exchange program worldwide.

“While we expect net additions to slow, we believe Netflix still has significant runway as it continues to convert users into paid subscribers and attract new cohorts,” the analyst wrote.

UBS also raised estimates on Netflix’s free cash flow generation through 2027. Analysts expect operating margins to expand on average 300 basis points per year over 2024-27, driving 26% compound annual growth in revenue. operational.

Assuming cash content spending of around $17 billion in 2024 and between $18 billion and $21 billion in 2025-27, UBS projects Netflix’s free cash flow will see a CAGR of around 20% (up from 18%) through 2027, “supporting an increase in buybacks [de acciones]”.