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Netflix raises prices despite password crackdown

Netflix is raising prices for some of its subscription plans, despite the success of its recent crackdown on password sharing.

The streaming giant said monthly charges for its UK basic service would rise by £1 to £7.99 and the premium option will increase by £2 to £17.99.

It reflects the firm’s growing confidence, after adding 8.8 million subscribers from July to September.

It was the most in more than two years.

For viewers in the US, the premium plan will cost $3 more per month at $22.99 (£19.00). In France, premium subscribers will pay an extra €2 at €19.99 (£17.40).

Netflix has been facing doubts about whether it can continue to draw in new members, as competition rises, prices climb and a Hollywood strike delays new releases.

In the first half of last year, it lost about one million subscribers, sending alarm bells ringing.

Much of the subscriber growth in the most recent quarter was driven by its move to start charging an extra fee – which amounts to a little less than half the £10.99 cost of its “standard” advert-free plan – to have more than one household on the same account.

The launch of a cheaper plan, with adverts, accounted for about 30% of sign-ups in countries where it was available, Netflix said.

“Management’s working hard to squeeze every last drop of cash possible from the available subscriber base,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

“As that cup begins to run dry, it will be a lot more important to understand exactly how successful the next phase of growth can be.”

Netflix said it believed it had the right mix of original hits and licensed fan favourites in its library to keep audiences coming, spotlighting Suits, the legal drama now known for starring Meghan Markle.

First released in 2011 on an American network, the series spent several weeks among the top 10 of Netflix’s most-watched English television shows over the summer, racking up more than a billion viewing hours globally.

Netflix, which has been emphasising its own productions in recent years, said in its quarterly update to investors that licensing had always been important and it saw potential opportunities to license more hits “as the competitive environment evolves”.

Analysts said licensed material was likely to prove increasingly important, as audiences feel the hit of the Hollywood strikes that have shut down new productions for several months.

Writers recently reached a deal, but the actors guild and the major studios, including Netflix, are still fighting over issues of compensation and artificial intelligence.

Studios are facing pressure from investors, who have grown increasingly sceptical of the big losses posted by some of Netflix’s rivals in the streaming business, such as Disney.

From that perspective, Netflix is in a strong position.

It reported quarterly revenue up 7.8% year-on-year at $8.5bn, while profits hit $1.67bn.

The company has been trying to nudge customers on to the advertising-funded plan, which it sees as having big potential to drive profits. That is one reason for the price hike to its “basic” advert-free plan, which is no longer widely promoted on its website.

“They’re certainly generating more revenue from the ad-tier subscribers than they are from the standard and premium subscribers,” Simon Gallagher, former director of content acquisition at Netflix, told the BBC.

“So they are very motivated to push their subscribers across to that ad-funded tier.”

Paolo Pescatore, analyst at PP Foresight, said he thought customers should expect to see even higher prices in the years ahead as the company looks to protect its profits and reckons with costs from licensing and new initiatives.

The company recently revealed plans to start opening a select number of bricks-and-mortar destinations for shopping, dining and Netflix “experiences”, something like a Netflix version of Disney World.

“Price rises are inevitable and we can expect this most likely on an annual basis, akin to traditional pay TV and other services,” he said.

Netflix shares jumped more than 10% in after-hours trade.

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