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A report that Netflix Inc. is planning to raise prices as soon as the current actors strike is over may prove untimely, given the weakness of equity markets and apparent deceleration of the global economy, Benchmark said Wednesday as it reiterated its sell rating on the stock.
The report by the Wall Street Journal “is an indicator of both mirroring pricing actions from its near peers, as well as that lower price point to consumer AVOD economics can be significantly accretive relative to SVOD. AVOD, or advertising video on demand, is the lower-priced service that includes advertising, while SVOD, is streaming video on demand.”
“This actually provides a positive cross read for competing services like Peacock and Max emphasizing AVOD and featuring high CPM live sports, as a Netflix executive indicated in May that its ad tier had nearly 5M monthly active users—moderate to other services,” said analyst Matthew Harrigan.
Netflix
NFLX,
last raised prices in January of 2022, when its ad-free standard plan rose to $15.49 from $14 and a higher-definition 4K version went to $20 from $18 a month. Netflix has since scrapped its mid-tier ad-free basis plan, raising the entry level price to $15.49 from just $9.99 and addressing password sharing with a $7.99 surcharge for users outside a main household.
Other streaming services are also raising prices, including Discovery+
WBD,
going to $8.99 from $6.99 for ad-free service and keeping AVOD at $4.99 a month. Disney
DIS,
is also planning to hike prices for Disney+, Hulu and ESPN as announced last summer.
The Writers Guild of America, which has just ended a strike, said its new contract implies compensation increases of just 0.2% or $68 million of Netflix’s annual revenue, which Harrigan said was less than Benchmark was expecting.
” We have not yet made any estimate revisions for the WGA strike resolution as there are moderate concessions to the union but no outright streaming residuals with bonuses only for the most successful shows,” he wrote.
Overall, Benchmark continues to view Netflix as more of a media stock than a tech one although its executing well on password sharing and AVOD initiatives.
“Continued U.S. dollar strength could challenge expectations for double
digit 4Q23 top line growth although this is no reflection on Netflix’s credible initiatives to complement its still #1 global video streaming position,” said the analyst.
Netflix’s stock was up 0.8% Wednesday and has gained 28% in the year to date, outperforming the S&P 500
SPX
which has gained 10%.
