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Depending on your subscription plan, the price hike adds up to an extra $24 or $36 you pay each year to the streaming service. Below, CNBC Select shares some ways to save on (and even benefit from) your Netflix subscription.
While you're unlikely to be happy about paying a higher monthly Netflix bill, it does mean you earn a bit more from that 6% cash back. Amex's cash back is earned in the form of Reward Dollars, which cardholders can then use as a statement credit to lower their credit card balance.
And with the U.S. Bank Cash+ Visa Signature Card, cardholders can choose to earn 5% cash back on two bonus categories each quarter, on their first $2,000 in combined eligible net purchases, then 1%. Television, internet and streaming services are counted as a bonus category and U.S. Bank's website lists Netflix as a sample qualifying merchant. Again, you can use this cash back to essentially lower your credit card bill.
T-Mobile has a "Netflix On Us" deal where qualifying cell phone plans get a free Netflix subscription. Those who aren't happy with their current cell phone provider should consider this benefit, which not only makes Netflix complimentary but also consolidates your streaming and cell phone bill.
Netflix allows you to pause your membership and come back to it. This can give you a break from the monthly subscription if you're looking to cut costs or if you're just not watching a particular show at the moment.
You just have to connect the bank account you use to pay your Netflix subscription to Experian Boost, and Experian will add your payments to your Experian credit file. Consumers can link positive payment data as far back as 24 months. Experian Boost also includes access to your FICO Score and Experian free credit monitoring that alerts you to changes on your credit report, such as new account openings in your name and balance updates.
Basic and Premium plan Netflix subscribers will now pay a little more each month for the streaming service. To help save on this cost, get a credit card that rewards streaming purchases, switch your phone plan to T-Mobile or take a pause on your subscription. And, while you're paying more for it, make sure that monthly Netflix bill is helping your credit with Experian Boost.
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of personal finance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
When Netflix transitioned to streaming, gradually leaving the DVD business behind, it became one of the greatest revenue-growth success stories in history. Netflix completely dominated the streaming market until its current rivals entered the market.
This is an example of the law of diminishing returns (or its equivalent, the law of increasing costs). Each additional dollar invested in advertising will have a worse marginal return than the previous dollar because it is probably directed at a subscriber who is more difficult to persuade.
Up to here, everything is fine for Netflix. However, as competitors HBO (with HBO Max), Amazon Prime (with Prime Video), Disney (with Disney+), and others enter the market, demand elasticity increases. With more substitutes, customers become more sensitive to changes in prices or content offered.
One of the problems for Netflix was that it was at the mercy of the large content distributors like HBO. It seemed that all the surplus was going to go to the owners of series and movies and that Netflix was going to take a loss.
At that point, Netflix decided to change its business from brokering content to creating content (or at least getting exclusive rights to new content). However, it is not at all easy to create winning content for an audience that is terribly critical, temperamental, and susceptible to short-term fads.
We know how much Netflix spends on producing a series. For example, the series Marco Polo cost $10 million per episode, so, before it discontinued the series, Netflix spent a total of $200 million on it. How much was this $200 million investment really worth? And what is the lifespan of a series?
This fits with the idea of economic calculation, in which accounting serves as a tool. This spontaneous order always evolves, and the way we treat investment in series and movies for accounting purposes is a good example of that.
The problem is that there is no capacity for increasing production. The streaming platforms with the most purchasing power, including Netflix, Amazon, Disney, and HBO, will demand greater film capacity. This does not include small producers of films and series, as these compete for the same resources with less purchasing power.
Production studios are delighted with the boom in film investments (I imagine UFM Film School is too), but the question is how sustainable this race to create more and more film content will be in a context of unprecedented rivalry.
At the end of 2021, the interest rate Netflix was paying was the lowest in the last five years. The drop in interest paid by Netflix came even though its debt increased from $5.5 billion to more than $13 billion in that same period. The really uncomfortable thing for the streaming giant is that if it were incredibly profitable, this debt would not have been necessary.
It is very likely that these big investments in film content will not translate to greater revenue for the companies making the investments. The only thing that is happening, for the time being, is that production costs are increasing as companies seek to attract customers in an increasingly competitive market. It is very possible that the greater investments in content will not translate to more and better series and movies.
Legal notice: the analysis contained in this article is the exclusive work of its author, the assertions made are not necessarily shared nor are they the official position of the Francisco Marroqun University.
Olav Dirkmaat is professor in economics at the Business School of Universidad Francisco Marroqun. Before, he was VP at Nxchange and precious metals analyst at GoldRepublic. He has a PhD in Economics from the King Juan Carlos University in Madrid. He has a master in Austrian Economics from the same university, as well as a master in Marketing Strategy from the VU University in Amsterdam. He is also the translator of Human Action of Ludwig von Mises into Dutch. He has a passion for investing, and manages funds for relatives, looking for investment opportunities in markets that are extremely over- or undervalued.
When Reed Hastings and Marc Randolph founded Netflix (formerly known as Kibble) in 1997, the company appeared to be little more than an upstart DVD rental business whose only real value proposition was the mail-order element of its operation. Fast forward two decades and Netflix has become one of the biggest TV and movie studios in the world, with more subscribers than all the cable TV channels in America combined. How did Netflix go from renting movies to making them in just 20 years?
Legend has it that Reed Hastings decided to start Netflix after returning a copy of Apollo 13 to his local Blockbuster. Upon returning the movie, Hastings was told that he owed $40 in late fees. Fearing what his wife would say about such a steep late fee and convinced there must a better way to rent movies, Hastings began to devise what would later become Netflix.
1999: Netflix announces its new subscription model. Introduced at an initial price point of $15.95, the subscription plan allows Netflix members to rent up to four movies at a time, with no return-by dates.
2000-2003: Netflix enjoys consistent growth. However, despite increases in both revenue and subscribers, Netflix is still operating at a loss. The company reports a loss of $4.5M in Q1 of 2002 alone. Much of this loss is the result of an increase in operational expenses over costs reported in 2001.
Even at a relatively high monthly price point, Netflix offered greater convenience and value in a (then) crowded space. It did this by eliminating two mainstays of all home entertainment business models, while simultaneously applying just enough restrictions on members to drive further growth. This allowed Netflix to not only score early wins with consumers (Keep rentals as long as you like! No late fees!), but also helped the company to further differentiate itself from the Blockbusters and the Hollywood Videos while increasing revenue.
The financial challenges that Netflix experienced from 2000-2003 meant that diversifying its service offerings was as much a business necessity as a response to external forces. The company was still several years away from debuting the streaming service we know today. However, behind the scenes, the company was already investing heavily in making Netflix a more personal, individualized experience by introducing recommendations powered by the CineMatch algorithm.
Netflix knew that its growth strategy was working. By making it easier for people to find and rent the movies they loved, the company had built a relatively small but growing subscriber base. Netflix knew it wanted to further expand its subscriber base through its DVD rental business before transitioning them to its online streaming service, even if nobody else saw what the company was doing. And, while its competitors remained focused on the short-term, Netflix was busy developing and investing in the technical resources the company would need to grow even further.
Consumer demand for streaming video was practically nonexistent. For one, streaming technologies in 2007 were terrible. Even the fastest broadband connections lacked the capacity to handle the bit rate of higher-resolution video, which meant overall video quality was poorer than DVD. When Netflix launched its streaming product, Watch Now was only compatible with computers running Windows and would only work in Internet Explorer after users downloaded an applet to make the video player work.
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