Streaming services like Netflix, Disney, and others have been steadily increasing their prices, and it doesn't look like they're planning to stop anytime soon. According to an analysis by Mark Schilsky, a sales specialist at Bernstein Research, a top internet and media research firm on Wall Street, we can expect to see even higher subscription fees for online streaming content in the near future.
These companies are striving to enhance their profitability, but in doing so, they risk turning their once-revolutionary products into everyday commodities. The latest victim of this phenomenon is the streaming industry.
Over the past year, the combined cost of subscriptions for services like Disney+, Hulu, Netflix, HBO Max, Peacock, Paramount+, and Apple TV+ has surged from $76.43 per month to $94.43 per month. Schilsky calculated this increase by factoring in both ad-free and ad-supported tiers, as well as data from Antenna. This represents a substantial 24% hike, compared to the relatively modest 3% increase in overall consumer prices in the United States. And it's important to note that this calculation doesn't even consider the implicit price increase resulting from Netflix's ongoing crackdown on password sharing.
Schilsky believes that these companies are far from finished with their price hikes. Recent statements from media industry executives seem to support this view. Disney, for instance, expressed satisfaction during its latest earnings conference call that its recent price increases haven't led to a loss of subscribers. Disney CEO Bob Iger noted, "The impact on churn and retention has outperformed our expectations."
Schilsky's analysis, which incorporates Nielsen data and other industry statistics, suggests that streaming services like Netflix, Hulu, and Peacock have significant room to further increase their prices, while HBO Max and Paramount+ may not have as much pricing power. Disney+ falls somewhere in the middle but is moving in the direction of raising its prices.
In essence, it appears that you should be prepared to shell out more for Netflix, Hulu, and Peacock in the not-so-distant future. Schilsky even created a chart to illustrate his findings. The lower a service's subscription fee is relative to its market share, the more potential it has to increase its prices. So, you can identify which services are likely to demand more from your wallet. Services that fall below the diagonal line on the chart have more untapped pricing power, according to Schilsky's analysis.
For instance, Hulu still has room to charge more even after its upcoming price increase on October 12th, which will see its ad-free service rise from $14.99 to $17.99, while the ad-supported tier remains at $7.99.
However, it's important to consider some caveats. Schilsky acknowledges that a company positioned above the diagonal line could suddenly gain extra pricing power if it produces a mega-hit like "Game of Thrones." Nevertheless, over time, consistent hit offerings are generally needed to sustain higher prices. Another possibility is that consumers may reach a breaking point and start canceling some of their subscriptions due to escalating costs, but Schilsky believes this is unlikely to happen in the near future.
In the event that subscribers do start resisting price increases, Schilsky suggests there is always the option of ad-supported video-on-demand (AVOD) services to turn to.