Please ensure Javascript is enabled for purposes of website accessibility

Netflix Subscribers Are Practically Begging for Another Price Increase

By Danny Vena – Sep 28, 2020 at 4:09PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The streaming giant could generate an extra $1 billion in subscriber revenue next year.

Netflix (NFLX 8.27%) has become a staple in many households during the pandemic as consumers hunker down at home to avoid catching the virus. While the streaming leader already had a fair degree of pricing power, increased subscriber demand may empower the company to boost prices even further. In fact, it appears viewers are practically begging for it.

Jefferies analyst Brent Thill raised his price target on Netflix to $570 from $500. He believes the tech giant will raise the cost of its most popular monthly subscription plans by $1 to $2 per month in each of the company's biggest markets, generating between $500 million and $1 billion in additional revenue in 2021. While he concedes Netflix will lose some price-sensitive customers, the majority won't even blink at a price increase, due to its deep library of content and the ongoing stay-at-home economy. 

Couple wearing wool socks huddled on the couch watching television.

Image source: Getty Images.

Thill recently completed a survey of 1,470 Netflix subscribers across the U.S., the United Kingdom (U.K), and India. One of the main takeaway's from the questionnaire is that 90% of the subscribers in India and 70% of those in the U.K. indicated that they would be willing to pay more for the service, though U.S. customers seemed less enthusiastic about a price increase. 

The streaming giant hasn't raised prices since early 2019, but that may be about to change. During the second-quarter conference call, Chief Operating Officer Greg Peters said Netflix was monitoring member engagement and churn, signaling that a price increase might be in the planning stages:

Those are the signals that we have for indicating when we have created more value for our members ... using those signs that we've done a good job at building more value for our members, which indicate to us, hey, it might be time to go back to them and ask them for a little bit more [money].

Danny Vena owns shares of Netflix. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.