Why did Netflix just impose a price increase across U.S. plans? As the “KPop Demon Hunters” Oscar-winning hit song “Golden” says: “We’re goin’ up, up, up.”
It’s not rocket science. The formula is pretty simple: Invest in more content (Netflix is eyeing $20 billion in content cash spending in 2026, up 10%) to attract and retain streaming subscribers, and keep your profit margins ticking upward by increasing the retail price.
Under the new pricing, effective March 26 for new users and rolling out to current customers depending on their billing cycle, Netflix’s Standard plan (which has no ads and provides streaming on two devices simultaneously) is rising by $2, from $17.99 to $19.99/month. The ad-supported plan is going up a buck, from $7.99 to $8.99/month, and the top-tier Premium plan (no ads, streaming on up to four devices at once, Ultra HD and HDR) is increasing from $24.99 to $26.99/month..
But the question is: Why now?
First off, it would be difficult to imagine Netflix would have pulled this pricing lever — hiking fees for its approximately 86 million U.S. customers — if the deal to acquire Warner Bros. were still in play. That deal would have required approval by the Justice Department and other regulatory bodies, amid allegations by David Ellison’s Paramount Skydance (the winning bidder for Warner Bros. Discovery) that the combo of Netflix + HBO Max would create a monopolistic entity in the streaming biz.
Netflix strongly disputed that, asserting it would have had a roughly 21% share of the U.S. subscription-streaming market with the addition of HBO Max. However, the optics of a Netflix price hike as the WB deal was pending would be terrible, especially after co-CEO Ted Sarandos testified at a Senate hearing that “We will give consumers more content for less” through the Warner Bros. deal. (Sarandos meant Netflix would have bundled its service with HBO Max at a price discount.)
Without the need to worry about such appearances in the midst of a massive M&A deal, the reason Netflix feels confident in ratcheting up prices in its biggest market is illustrated by this chart from Wall Street analyst firm MoffettNathanson. It estimates revenue streamers generated in 2025 as a function of total number of hours viewed.
In a nutshell, it shows that Netflix delivers the best bang for the buck of this cohort — it pulls in 48 cents per hour viewed, lower than anyone else. That indicates Netflix not only has upside in ad revenue relative to the others but also that has room to raise its pricing from a competitive standpoint.
Even with the new price increases, Netflix will still have a sector-low revenue/hour viewed metric (call it in the 50-cents-per-hour range). As the MoffettNathanson analysts put it: “Netflix delivers significant value to its subscribers that has room to be better monetized over time.”
Note that all of Netflix’s competitors have also recently hiked prices. Disney+ and Hulu, HBO Max and NBCUniversal’s Peacock upped pricing last year, and Paramount+ raised prices in January. Next month, Amazon’s ad-free Prime Video tier (now called “Ultra”) is going up to $5/month.
And Netflix’s new pricing, while higher, keeps it roughly in line with the rest of the field. Indeed, its ad-supported tier remains cheaper than those from Disney+, Hulu, HBO Max and Peacock (and is now the same as Paramount+ with ads):
Netflix’s launch of the cheaper, ad-supported option, first introduced in November 2022, gave it an important tool to mitigate churn as it raises the price on its Standard (no ads) plans. Instead of presenting customers a take-it-or-leave-it price hike, Netflix can now steer those on the Standard package toward the lower-cost package with ads. In theory, the company is agnostic about which plan someone chooses: The ad revenue should make up the difference in subscription fees.
Netflix execs once swore they wouldn’t implement an advertising model, asserting that it’s a subpar user experience. But it’s clear people are willing to sit through ad breaks if it means paying less — and in the U.S., Netflix’s Standard With Ads plan is half the cost of the no-ads tier.
The streaming giant’s U.S. price increases reinforce its long-range strategy, according to MoffettNathanson’s Robert Fishman: It maintains a “wide gap between its highest and lowest tiers to simultaneously maximize monetization of its least price-sensitive subscribers while nudging more price-sensitive customers toward its still-nascent ad tier, driving engagement and, in turn, advertising revenue,” the analyst wrote in a research note Friday. “The result is a ‘best of both worlds’ approach that captures value across the full spectrum of its subscriber base and should drive even higher margins for the leading profitable streaming service.”
Will some Netflix customers cancel over the latest fee increases? Yes, of course. But the math indicates that overall, it will yield higher returns — letting the company dig an even wider moat against competitors.
Pictured top: Sadie Sink as Max Mayfield in Netflix’s “Stranger Things” Season 4
SEE ALSO: U.S. Household Spending on Streaming Video Services Remains Flat at $69 per Month, as 68% Now Pay for Ad-Supported Tiers
Leave a Reply