Many customers of the Disney streaming service Disney Plus are currently receiving electronic mail from the US company: “Disney is increasing the price of your subscription,” it says. The subscription will then cost 11.99 euros per month instead of 8.99 euros. This is the second time since the streaming provider was launched in 2020 that it has significantly increased its prices for existing customers. And Disney is joining an increasing number of providers who are raising their prices.
Industry star Netflix increased its prices significantly on June 1st, for the second time in two years. The basic subscription will soon cost 9.99 euros. Anyone who wants to watch Netflix on multiple devices and without advertising will now pay 19.99 for the premium category. Apple’s TV service increased in price from 4.99 euros to 6.99 euros at the end of 2023. Now the price is rising to 9.99 euros. YouTube’s premium service became between one and six euros expensive at the end of last year. And music provider Spotify is also raising prices in the USA by another dollar.
Analysts from the auditing firm KPMG described the significant streaming price increases of recent years as “streamflation” in a study – but while consumer price inflation is currently declining overall, streaming services are even increasing their prices. From their point of view, this makes sense, because the current quarterly figures show that users are barely reacting to the price increases and the price elasticity of demand is extremely low. The services can therefore increase prices with impunity, but hardly any users cancel their subscriptions.
Netflix, for example, recorded 232 million paying users in the first quarter of 2023, compared to 269 million in the first quarter of 24. At the same time, the price increases caused revenue to rise by a greater percentage than the number of users, increasing from $8.1 billion to $9.3 billion.
Spotify had a similar experience, with the number of premium users increasing by 14 percent from 210 to 239 million users within a year despite price increases, and subscription revenue increased by 20 percent to almost 3.2 billion dollars in the same period.
Users may be moaning online about the new prices and threatening to cancel their subscriptions – but hardly anyone actually wants to do without the streaming services.
At the beginning of June, analysts at J.P. Morgan wrote confidently that the bank expects further price increases from all streaming providers: “The second round of price increases within 18 months should give investors more confidence that developed markets will experience sustained price increases” – good news for the shareholders of the streaming giants, bad news for consumers.
But the price increases are not just intended to increase revenue from subscriptions: for at least some providers, they are also part of a strategy to subtly push customers into either ad-financed offers or more expensive premium subscriptions. The basic tariffs disappear from the market as soon as the services are so established that they no longer need bait offers.
Netflix, Amazon, Disney Plus and various other US media companies have now abandoned the old streaming promise of not wasting customers’ time with advertising. The lack of advertising was once one of the providers’ most important marketing arguments compared to traditional television.
But Apple is now the last service that still manages to do without advertising. All the others have now recognized the potential of opening up a second revenue stream through advertising.
Amazon is particularly aggressive in exploiting the laziness of its customers: since February, Prime Video viewers have had to endure minute-long advertising breaks every hour without the subscription price becoming cheaper for them. Anyone who wants to hide them has to pay three euros more per month. German consumer advocates are currently suing against this hidden price increase.
As part of the price increases, Netflix has also introduced a discounted ad-financed subscription in Germany and has abolished its basic tariff, which was recently just under eight euros. Customers can get a cheaper subscription if they accept advertising. The subscription then costs 4.99 euros per month. Disney Plus is also offering its customers a subscription with advertising for 5.99 euros as an alternative to the price increase.
Apparently, many users are willing to spend their free time with advertising interruptions if they have to pay less for it. Netflix, for example, has almost doubled the number of customers with advertising subscriptions to 40 million within a year and is launching its own advertising network.
According to a study by London-based media market analysts Ampere, ad-supported offers not only serve to retain users who do not want to accept price increases, but also to enforce price increases: “The existence of an ad-supported subscription at the same price not only reduces churn, but also encourages ad-shy consumers to switch to more expensive subscriptions.”