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Evening Standard
Evening Standard
Technology
Saqib Shah

Netflix price cuts not expected for UK, but add-on member options likely

If you’re wondering if Netflix will slash prices in the UK as it recently did in multiple countries, don’t get your hopes up.

Top streaming experts expect the company to hold its nerve on subscription costs, even as it grapples with a massive backlash over its password-sharing crackdown. Still, it could let you add extra members to an account for a monthly fee after introducing the option in several markets, including South America, and Canada.

Earlier this week, Netflix lowered monthly subscription prices for its streaming plans in more than 100 territories globally. In Indonesia, it discounted the price of its ad-free basic plan by 46 per cent to £3.46, while customers in Egypt and Ecuador were gifted markdowns of 27 per cent on its most popular Standard tier.

As the figures indicate, the price of Netflix varies wildly around the world. In the UK, the service starts from £5 with ads and stretches to £16 for the Premium plan with perks including Ultra HD content and the ability to watch on four devices at the same time. By comparison, in India, where Netflix previously reduced prices in 2021, the service costs between £1.50 to £6.55.

So, why won’t Netflix implement similar price cuts in the UK? After all, Brits are contending with a cost-of-living crisis that could prompt some to cut luxuries such as streaming subscriptions, especially when many are already paying £159 a year for a TV licence.

According to streaming analyst Toby Holleran, the company is facing a tricky balancing act in the UK. Netflix already hiked local prices at the beginning of last year by £1 a month, for both its standard and basic plans, and by £2 for its Premium tier. A discount could also lead to a drop in revenue while doing little to boost subscriber numbers in a market that is already rife with streaming options, including US rivals Disney+, Amazon Prime Video, and Paramount+, Holleran explained.

“The UK is Netflix’s second-largest market in revenue terms, representing around £1.6 billion in revenue last year,” Holleran, research manager at Ampere Analysis, said. “So even a 10 per cent price cut could represent around £160 million in lost revenue.”

He continued: “As the market is reaching saturation, so a price cut might not generate too many new subscribers due to the smaller addressable market than many other countries.”

Netflix is more affordable in the UK

In real terms, Netflix is already cheaper here than it is in many other developed markets. Of the 244 territories Netflix operates in, the UK is the 60th-most-expensive market for the Basic tier in GBP terms (based on February exchange rates), the 35th-most-expensive for the Standard tier, and 19th-most-expensive for the Premium tier, according to Ampere Analysis.

Switzerland has been the most expensive place for Netflix subscriptions for a while, with its standard tier coming in at £16.70 per month. The US - where a standard plan costs £12.50 – is also one of the priciest Netflix markets in the world, because its subscriptions don’t include sales tax.

“While in absolute terms the UK Netflix prices are on the slightly higher side, particularly for the Premium tier, once purchasing power is taken into account, the UK is actually priced towards the cheaper end of the spectrum,” Holleran said.

Some believe that Netflix introduced the price cuts as an incentive to get more users to sign up ahead of its password-sharing crackdown. For its part, Netflix says the new policy will help fuel its content spending spree, which saw it splash $17 billion (£14 bn) on shows and movies last year.

Netflix risks losing six million UK users over password-sharing crackdown

Netflix began waging a divisive battle against account sharing after suffering a downturn in subscriber numbers early last year. The streamer started enforcing the rules in South America and expanded them to Canada, New Zealand, Portugal, and Spain earlier this month, with plans to implement them in the UK by late March. News of the impending crackdown has prompted a backlash in some of the company’s most profitable markets, including the US and UK.

Searches for how to cancel Netflix spiked in the UK earlier in February, after the streamer mistakenly revealed how it will enforce the policy. The method primarily relies on Netflix checking how many devices are connected to a home wi-fi network in order to prevent outsiders from gaining free access.

Netflix could cut six million UK households off from its service as a result of the new rules, Holleran said.

The number represents the amount of Brits who are using the service for free through someone else’s account. Netflix previously said that 100 million people are using it without a subscription. The company finished 2022 with around 15 million UK subscribers, according to Ampere Analysis, which represents around six per cent of its total subscriber base. That would translate to six million non-paying Brits that stand to lose access to the service if they don’t fork out for a subscription.

Still, Netflix probably won’t lose much sleep over the decision. Existing subscribers are expected to stay put, while password sharers will either flee or pay extra to be added on to someone else’s account, Simon Murray, principal analyst at Digital TV Research, said Netflix is offering the latter option to subscribers in countries where it is already restricting account sharing.

The company also offers a cheaper plan with ads that should “appeal to the casuals,” he added.

But some paying customers could drop down to less costly plans in a move that would hurt the company’s bottom line, especially those who are on higher tiers purely because they can share the service with friends and family, Holleran noted.

“There is slightly less disparity between the Basic and Standard tier since the resolution on the Basic tier was increased from 480p to 720p in November, bringing it much closer to the 1080p offered on the Standard tier,” he said.

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