When a flood of streaming services entered the market four years ago, the free trials were plentiful and the prices were extremely low — with Apple TV+ selling for just $4.99 a month and Disney+ charging a mere $6.99 a month.
But now, as those services become more established, subscription costs have ballooned. In 2022, prices for the 10 largest streamers have increased an average of 10% and increased 10% on average in 2023 thus far, according to the Convergence Research Group, a market research company. Fees are expected to increase even more next year, the firm said.
Media companies are charging more as they struggle to transition from profitable but declining business models — like traditional television channels — to on-demand streaming services, many of which are still losing money. The surges in pricing come as consumers are grappling with inflation and broader economic uncertainty. People who abandoned expensive cable bundles in favor of cheaper streaming services are finding that their total monthly subscriptions add up quickly.
“They had to start that low because they were nobodies, but now they’re a plurality of TV viewing,” said Mike Vorhaus, CEO of Vorhaus Advisors. “So what do you do when you control the market? You raise the prices.”
Netflix in July removed its cheapest ad-free option for new and returning members, which cost $9.99 a month. New subscribers now must choose between Netflix’s cheaper ad-supported tier ($6.99 a month) or its standard commercial-free version ($15.49 a month).
During the company’s second-quarter earnings presentation, Netflix’s CFO said the company was more than a year away from adjusting prices in the major countries where it operates. But the Wall Street Journal recently reportedthat Netflix planned to increase ad-free subscriptions after new contracts between major studios and the writers and actors guilds go into effect. Netflix declined to comment.
Rival streamers also have raised their prices. Last week, Discovery+ announced it will raise the fee for the ad-free plan by $2 to $8.99 plus taxes, and this month, ad-free Disney+ will go up by $3 to $13.99 a month. Meanwhile, Apple TV+ increased $2 to $6.99 a month in October 2022.
Why are we paying more to stream shows?
Many streamers are still losing money. Major studios were eager to chase Netflix’s business model of spending billions of dollars in content to attract millions of subscribers worldwide. They entered the market with low prices to gain market share and Wall Street applauded companies that saw surging subscriber growth. That changed in 2022 when Netflix for the first time in more than 10 years lost 200,000 subscribers — which led to a course correction where now Wall Street values profitability.