Price Storm: Why Major Streaming Services Have Hiked Rates This Year

Binge-watching, America’s new favorite pastime, has become more expensive than ever.

In October alone, seven top streaming plans increased their U.S. pricing. Apple TV+ now costs $9.99 a month — marking the second increase in a year — while Netflix raised prices on two plans. Also last month, Disney hiked fees for Disney+ and Hulu plans without ads, as well as ESPN+, and so did Warner Bros. Discovery’s Discovery+.

More from Variety

Across those tiers, the monthly price rose on average 23% — well above the 3.7% 12-month inflation rate for the U.S. as of September. That comes after other major subscription streamers, including Max, paramount+ and Peacock, jacked up rates earlier in the year. Meanwhile, in 2024, Amazon is introducing ads in the baseline Prime Video service. If they don’t want to sit through ad breaks, customers can pay $2.99 a month in addition to the cost of Prime membership ($139 annually).

“The era of ‘streamflation’ is here,” says Scott Purdy, U.S. national media industry leader for professional services firm KPMG.

Why are companies risking higher cancellation rates to get higher revenue per subscriber? Herd mentality is part of it: It’s easier to justify an increase if all your competitors are doing the same. The price upticks also are tangible evidence of the industry’s overall shift to making money and not just packing on subscribers with low prices. “Companies went from chasing subscribers to chasing profits,” says Purdy.

Essentially, many services have been subsidizing their growth with lowball monthly pricing, amassing hundreds of millions of dollars in operating losses to gain market share. They were following the playbook established by Netflix, which absorbed years of red ink before it hit enough scale to achieve strong positive cash flow.

But the streaming land grab is over. And given investor pressure, traditional media companies are “not prepared to wait 10 years to get to profitability like Netflix. They want it now,” says Colin Dixon, founder of independent analyst and consulting firm nScreenMedia.

Another dynamic in play: Many of the streaming services have expanded their range of price points, with entry-level plans now including advertising. Netflix and Disney, for example, have kept pricing for their relatively new ad-supported tiers unchanged while raising fees on plans without commercials. According to Purdy, that’s a crucial component in streamers’ strategy for retaining price-sensitive consumers who are willing to pay less in exchange for watching some ads.

With the price increases, streamers also may be trying to get in front of greater content costs resulting from 2023’s strikes. The WGA secured higher payouts for made-for-streaming TV programs and movies in settling with the studios, and SAG-AFTRA also is fighting to get better compensation rates for actors.

“Streaming companies have had a free ride on residuals,” says Dixon. “And that free ride is over.”

Best of Variety

Sign up for Variety’s Newsletter. For the latest news, follow us on Facebook, Twitter, and Instagram.

Click here to read the full article.