Netflix’s Price Hike and Opening Day Debut. Plus, HBO's ‘Harry Potter’ and the Millennial Nostalgia Era.

0:00This episode is brought to you by the Home Depot. Spring is starting, so it's time to wake up your yard. And at the Home Depot, they've got everything you need to do it with low prices guaranteed. Mowing your lawn is a dream with top brand outdoor power tools like the Ryobi 40-volt mower with up to 50 minutes of runtime. You can add a pop of color with spring blooms and fresh plants and refresh your garden beds with EarthGrow mulch, five bags for just$10. Start your spring with low prices now through April 1st. Available at the Home Depot. Exclusions apply. See homedepot.com slash price match for details.

0:44Matt Belloni:This episode of The Town is brought to you by The Madison, the new original series on Paramount+. It's Academy Award nominee Taylor Sheridan's most intimate story yet. A New York City family is uprooted to Montana after an unexpected tragedy. In the quiet majesty of the Madison Valley, they confront love and loss, discovering resilience and the transformative power of family and the land that grounds them. Led by a powerhouse cast, Academy Award nominee Michelle Pfeiffer and Golden Globe nominee Kurt Russell. Don't miss The Madison, the highly anticipated new series streaming now, only on Paramount+.

1:19Matt Belloni:It is Monday, March 30th. Stop me if you've heard this one before. Netflix just raised its prices. The standard plan, that's no ads, is rising by$2 a month from$18 to$20. The standard ad-supported tier is going up$1 to$9 a month. And the premium goes up to$28. That's the second price hike in about a year for Netflix. And very upsetting for Craig, who recently became a real adult and stopped using his parents' account. This makes Netflix the most expensive standalone service, which kind of makes sense. They're spending the most on original content. and Netflix seems to be further pushing its members to its ad tier, where the revenue per user is higher for most services, although not exactly for Netflix just yet.

2:03Matt Belloni:Wall Street, no surprise, they liked the move. The stock price jumped. But will this hurt subscriber growth? Remember, Netflix has lost a ton of value during its whole pursuit of Warner Brothers, and it's really looking for the next growth narrative now that buying HBO Max isn't happening. It's not alone in the strategy of raising prices for ad-free tiers as well. Most of the streamers have recognized the value of those customers who don't mind watching ads. Amazon Prime Video first turned on ads for all members who didn't opt out, and now it's asking users to pay$5 a month more to avoid ads. Today, we're going to get into that strategy with Lucas Shaw, our Monday guy, and also talk about some of the recent Netflix content moves, particularly sports.

2:43Matt Belloni:It just aired MLB Baseball's opening day for the first time to some mixed reactions. But MLB is in an interesting spot as well, with a recent resurgence in ratings for the World Series, as well as the World Baseball Classic, just as its rights are in play. So today it's Netflix's price hike and baseball's new momentum. From The Ringer and Puck, I'm Matt Bellany, and this is The Town.

3:10Matt Belloni:Okay, we are here with Lucas Shaw from Bloomberg, our Monday guy. Lucas, true or false, did you purchase the$75 Shohei Otani commemorative drink cup that only came with free refills for one game, and then people went nuts, and now you get free refills for the entire season? I did not, because I generally don't buy any concessions at Dodger Stadium. Maybe some beer or soju. That's about it. Yeah, when we went, you got some soju. It's the cheapest way to drink it, Dodge Stain, because we were talking about it with the group next to us for opening day. And I think beer is now more than$20 just for a tall boy.

3:50It's insane.

3:51Matt Belloni:We're going to talk sports a little bit on this episode, but I want to talk first about the latest Netflix price hike. Because I did a little experiment with my fourth grader last night where I had him add up all seven streaming services, what they would cost if you purchase them on their own. I understand there are bundles, so this does not include any bundles. But if you bought the ad-free tier of all of these streaming services, all seven, it would be$128 per month. And what are the seven we're including? We're including, obviously, Netflix. And then we're including Prime Video, Hulu, Peacock, HBO Max, Disney Plus.

4:39Matt Belloni:Paramount plus. And so we're not, we're not even counting the Disney Hulu bundle. We're not. And we're not including Apple as Apple does not offer an ad tier. So this is the second part of my experiment. And for Amazon, we're counting what you pay for prime. We're not counting. Yes. Okay. Then if you did it, this is the second part of my problem for him. If you did it with ads, it comes out to$76 again, not including bundles. So the problem for fourth grade math is how much do you save if you do the ad tier on all of these services? And the answer is you save$52 per month. Pretty compelling, right?

5:19Matt Belloni:So I think that answers the question of why Netflix is hiking prices for their ad free tier and pushing people into their ad tier. Yeah. Well, they're bifurcating the market. Either you're someone with the means to pay for a premium service and really don't want ads or you're not. And then they can boost the number of people on the ad tier, which will increase the amount of ads they can sell. I mean, they got rid of that plan that was in between the ad tier and the standard because it was clearly becoming the least lucrative for them. Right. They have said that the ad tier is still not as lucrative for them as the standard one.

5:56Matt Belloni:But Amazon, the ad tier is more because they turned it on for everybody. Well, and Amazon just has a robust advertising business. Netflix is still new to ads and doesn't have the scale of Amazon to just immediately flip a switch and have billions of dollars flowing in. So that would suggest that that's not the reason they're doing this, unless they're trying to build that up significantly. Is this just a Wall Street, we've got to do something because we lost HBO Max and our stock price cratered by a third during that process? So we've got to do something that the market will like. Wait, why would you say that that suggests it's not real?

6:33I think there's two things at play here. One of which is they have pretty consistently now raised prices on their plans, but especially the ad-free plans.

6:45Matt Belloni:I'm just saying that if they can't monetize it yet, if they're not monetizing as well as some of the others. Well, they want to monetize more effectively. And so if they can drive more people to the ad tier, it gives them more scale. And it makes it easier for them to make money. And the market likes when you're charging more. They think Netflix has incredible pricing power. They think they have the best content, even though that's debatable. They certainly are spending the most on original content, non-sports. And this is the model. You keep spending, you keep charging more. They have the best churn of any video streaming service in the marketplace.

7:23I think Spotify's churn is probably still a little better than theirs, but it's a lot less expensive. One of the things that's interesting about that with the, you know, their attitude is we raise prices because we spend more money. And that is 100 % true. But if you actually look at the data, the surge in spending kind of happened first. And Netflix remained like there was a point in time at which the Netflix Netflix was such a crazy deal because they were starting to spend like$10 billion a year. And it only cost like eight or nine dollars. The last few years, the spending has leveled off, but the price increases have accelerated.

7:58So you are actually now paying more for kind of the same.

8:03Matt Belloni:Yeah, the ratio has changed. It's not as great of a value as it once was. But that's probably true across all the services. I mean, Disney Plus launched with that entire Disney library and it costs, what, six bucks a month? And now they're up to 18 bucks without ads. No, Netflix relative to the peers has still been the best deal because all these other services have raised prices without really boosting their programming spend that much other than other than if you include sports for, you know, Peacock and adding the NBA and things like that. I do think you kind of have to include that. I mean, Disney always talks about how their spend is actually more if you include all the sports rights for ESPN.

8:43Matt Belloni:But again, they bifurcate that into a different service and you can't just sign up for Disney Plus and get all the sports. Well, and if you get the full Disney bundle, it's far and away the most expensive product of these streaming services. Well, that gets me to my next question. Is Netflix more or less likely to do one of these bundles now that they are getting so up there in their pricing? Does this make it more likely that they will do a partnership? Now, bundles do exist. A lot of the third... Well, define bundles because they have some bundles already. Well, but they have them through other external services like Xfinity and T-Mobile and Verizon.

9:23Matt Belloni:They bundle them. Didn't they do some experiment of co-selling with someone? The fact is Netflix has been somewhat of an outlier on its willingness to bundle. And for obvious reasons, they don't need to. They are the market leader. Amazon would love to sell Netflix with other services via Amazon Prime Video. And they can't. They can't sell Netflix because Netflix does not want to give away money to Amazon for selling its product. Do you think that now that the price of Netflix has reached$20 a month, that they are more or less likely to bundle? I don't know that that's going to affect how they approach bundling.

10:01I think that they are looking for opportunities, especially abroad, to combine with or to fold in local players that can't compete in streaming. They did that deal in France with TF1. They have some deals in Korea. I think they can just keep rolling. They can look across the world and be like, oh, you're a big TV network in Brazil or Mexico or England, and you don't have the resources to compete in streaming. So just make us your streaming service. That feels like their answer to kind of the Amazon channels business that has worked so well for them. But I guess they could. Netflix would have to do research on how much they thought that they would benefit from bundling with Peacock, right?

10:45Right. And also Netflix would probably say to Peacock, okay, your churn is bad. Our churn is good. We can do a bundle, but you know who's taking a price cut? You're taking a price cut. We're going to still get the same amount. You're going to benefit more from our scale than we benefit from your programming.

11:00Matt Belloni:Yeah, it's like when Disney released Marvel movies in theaters, they were like, yeah, we'll give you three Marvel movies a year, but we want 70 % of the first weekend box office if we're going to do this? And what kind of leverage do you have if you're the theaters or if you're Peacock in this situation? If you want to get in bed with the biggest player, you got to pay up. Yeah, for Netflix, it's what are they missing that they need to offer in a bundle, right? Okay, they don't have a robust sports offering. So if they wanted to partner with someone who offers sports, maybe that would work. Otherwise, like, because of the pay one movies, they have a lot of movies.

11:36You know, we can argue over whether their shows are good or not, but from a volume and a breadth perspective, they kind of have everything. So I don't know what they're, I don't know what they're going to gain from partnering with HBO or which probably won't happen now in a, in a Warner Mount universe.

11:50Matt Belloni:But I think it's sports. I mean, as much as they've dabbled, they still don't have that return every day or return every few days for sports. And they've explicitly gone the other direction in sports. They're trying to eventize everything, which leads us to our second topic. Well, hold on. Can we, can I, what about a Netflix Fox one partnership? I was trying to think, cause there's no way Disney is going to do an ESPN deal with them, but wouldn't Fox is probably the second biggest sports rights holder. They have no scale streaming. And it would give people a reason to tune into Netflix on a Sunday afternoon, which we typically don't.

12:28Matt Belloni:Yeah. This episode is brought to you by tax act. Like an expert coach tax act offers step-by-step guidance and guaranteed accuracy when filing taxes. Get tips along the way, add expert assist to talk to tax experts and let our experts do your taxes for you with expert full service. Tax Act helps you find the deductions and credits you deserve so you can get them over with. Visit taxact.com to learn more. Conditions apply. See taxact.com for details. Protein is now at Starbucks and it's never tasted so good. You can add protein cold foam to your favorite drink or try one of our new protein lattes or matcha.

13:06Matt Belloni:Try it today at Starbucks.

13:12Let's get to MLB opening day.

13:16Matt Belloni:Did you watch, and what did you think of the Netflix broadcast? Did I watch the Netflix broadcast? Yeah. I tuned in for a little bit just to see what it was, and I've seen clips online. And you immediately tuned out? No, I was going to actual Dodger opening day the next night, and I didn't really care about watching a Yankees-Giants blowout. Yeah, well, that's the problem is Netflix tried to turn opening day into a big event when, you know, baseball is 162 games. It's just tonnage. People watch it as background in their lives. They don't consider it to be an event. And it was a blowout game. And they were doing all these stunts.

13:53Matt Belloni:They had a WWE wrestler there. They had constant promos for their other shows. Jason Bateman did a hype video for the seventh inning stretch. Like, yeah, he's the Tom Cruise of Netflix. but he's it's it just didn't work it doesn't baseball is not eventized like that so i feel like the fan backlash was justified netflix probably doesn't care it's so small for them but they did try to do something different and i'm not sure it worked it well i would say two two things on that one anyone talking about a march 26th or whatever it was baseball game is a plus for Major League Baseball because it's in the middle of March Madness and nobody really would have cared about a Yankees-Giants game.

14:38But more to the point, I think the opening day for them was about, one, telling the customer, we have baseball. Because what they wanted was home run derby. But I think they felt like if they just had home run derby, that would be weird. And so you take opening day, you say, hey, we have a little baseball. You try some things. You are very comfortable with it. Obviously, you would rather that it, you know, work and everyone love it. but then you know what does and doesn't work for for home run derby i think home run derby is the

15:06Matt Belloni:real test you put bert kreischer in the ocean and hopefully there'll be a home run ball to him which there wasn't um yeah so i agree the home run derby is what they want i mean they're getting this field of dreams game as well uh but you know my colleague john arand reported that advertisers were not really convinced by Netflix's sell that this was an event. Yeah, who cares about one baseball game? And also, if you were to have it, wouldn't you want that opening day game on Netflix? And I'm not saying this because I'm a fan. Wouldn't you want it to have the Dodgers, the two-time defending champions with the most famous baseball player in the world?

15:43You might, yeah.

15:44Matt Belloni:But, you know, the Yankees aren't bad. And the schedule didn't match up that way. They just didn't have the schedule match up. Well, that's fungible. I guess, yeah. but it does get to this question of where MLB is right now and I wanted to talk a little bit about that not just because you and I are fans we're trying not to get into the nitty-gritty here but objectively looking from a sports rights perspective at a very interesting time for sports rights negotiations baseball seems to be on a roll the WBC the World Baseball Classic ratings this is a tournament every three years amongst teams from around the world the ratings were insane.

16:22Matt Belloni:10.8 million people tuned in on Fox and Fox deportes for the final. That is more than double the previous championship game, which did not have the U S no, it did have the U S it was U S Japan. And the numbers for the regular games during the WBC were way up opening day is now on Netflix. They had three primetime national games during opening week. It seems like baseball with the rule changes and everything that's going on has been doing the right things for their ratings yet still there are challenges in this environment when you're not the nfl yeah well they fixed a lot of broken parts of the sport that it took them way too long to fix you know they address pace of play with the pitch clock and some of the other tweaks around you know starting someone in second inning second base in the extra innings which i still don't love and i think the you know people are having fun with the kind of the robot balls and strikes because it's making players look stupid.

17:23It's making umpires look stupid.

17:25Matt Belloni:Finally, you can dunk on an umpire when you know that you're right and the umpire got it wrong. And then the computer backs you up within 10 seconds. But you're right that, well, the ratings for the big games are good. I saw someone break down. The ratings for kind of like local baseball, I think, is still worse than local basketball. or at least the like the average basketball game is still outdrawing baseball. But the real problem for baseball is that the RSN business, the regional sports network business is collapsing. So I think now more than like half the teams have the league handling their local media deal.

17:59And that'd be fine if you trusted the league to take all the rights and create one product for people to pay for and watch their local games. But there are big market teams like the Dodgers and the Yankees that don't have interest in participating. And so you just have a bunch of teams getting less money from their media than they used to. And the really big problem is that basically everyone agrees that there's going to be a lockout next year. And so you have baseball. And I think you're right. Popularity cresting.

18:23Matt Belloni:The World Series was like 25 million viewers for that final game. That is insane for baseball. You have the two best players in the world on the two most famous teams in the sport. And even though they're both kind of boring, it still means that they're very compelling. How dare you say that about Shohei Otani? I will give you that Aaron Judge is boring. I will not give you that Shohei Otani is boring. But I agree with you that they finally have this momentum and they're probably going to have a lockout, which will kill the whole thing. But the rights deals are up in 28. And what seems to be happening is MLB is getting all of these rights together.

18:58Matt Belloni:They have these two year deals. You know, Sunday Night Baseball just moved to NBC from ESPN. And they're kind of experimenting right now. There was a joke. I think it was The Onion or Babylon Bee. Like it said that, you know, every inning of a baseball game is going to be on a different streaming service. It does feel that way because with Netflix and then the Friday night games were on Apple and then Saturday was on Fox and FS1. And then there's games on TBS and then there's your local games. And then NBC has Sunday night. It feels like they are scattering all these rights all over. And the goal, I think, is to have some kind of NBA-style moment in 2028 where they can take majority of these rights to the market and hopefully get some massive deals like the NBA did.

19:45Matt Belloni:The question is, is that possible with the NFL also looming over the shoulder of all of these media companies? Makes it harder. But I think the lockout is as big, if not a bigger challenge. If there's no baseball next year, their leverage or their value in those negotiations. goes down because people will be worried about falling interest. Look, it's kind of pointless to compare the NFL to any of these other sports. It's just so much bigger and so much more popular. And so, yes, if you're a media company, you're going to prioritize having or keeping the NFL. And we've reached a point where almost every major company has NFL rights.

20:19But baseball being in a good spot means, you know, between Disney, ESPN, Comcast, NBC, maybe it's Amazon, maybe it's Netflix, they can probably get some takers. There's just a lot of baseball. And so the, the, the kind of the bigger issue for them is what do they do with all those local games and who's going to have them?