Customers May Not Like Netflix's Price Hikes, but Shareholders Will

If you follow the investment strategy of "buy what you know," it doesn't prepare you for the emotional conflicts that can arise when you're both a company's shareholder and its customer.

That dynamic is playing out now for some people with streaming giant Netflix (NASDAQ: NFLX), which last month hiked prices across its ad-supported, standard, and premium tiers.

If you take your customer hat off and look past the frustration of paying more for a subscription each month, that's actually welcome news, as from an investor perspective, it helps offset concerns about the company's rising content costs.

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The price of a competitive advantage

When Netflix began streaming video content in 2007, competition in that niche was minimal. The company's service was able to stand out largely just because there weren't many similar alternatives.

Today, Netflix, Amazon, Walt Disney, a handful of other heavyweights, and a raft of smaller ones are elbowing each other in a far more crowded streaming space, vying for attention. With so many streaming options now available, it takes a lot more effort to stand out.

The way to separate from the pack is through unique content, which is why, in addition to always being on the hunt for its next hit, Netflix is stepping into streaming sports, concerts, and video podcasts. The catch with offering those unique classes of content in quantity is that it's expensive; Netflix's content costs are expected to increase by 10% in 2026.

The newly higher subscription costs may lead some unhappy people to drop the service or downgrade to a lower-priced tier, but for shareholders, the expected net increase in revenue from the hikes should be viewed as a positive development.

Creating a cash cushion

There were periods in the past when Netflix made a habit of taking on significant debt to fund its operations. Today's shareholders don't want to see it revert to borrowing large sums of money to pay for new content. They want the streaming giant to cover those costs out of its cash flow. The ability to tap into the increased revenue these price hikes are expected to generate should help dial down concerns about the company's aggressive spending on programming.

Beyond the matter of generating enough revenue to pay for content, the other key to Netflix's ongoing success will be spending on the right content.

"As we seek to better satisfy members and increase the value of each hour of engagement, we recognize that not all viewing is created equal," Netflix said in its fourth-quarter 2025 shareholder letter.

Netflix no longer publicly shares its quarterly subscriber counts, so the things that investors will want to focus on in its next earnings report are revenue growth, ad sales, and free cash flow. Those will help tell the tale: Is the company executing on building a stronger content library that's winning over new subscribers and keeping current ones happy, or does it need to reevaluate its content development and acquisition criteria because the financial picture is less than rosy?

We'll have more insights on that soon: Netflix's Q1 2026 earnings report is due out on April 16.

Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Netflix, and Walt Disney. The Motley Fool has a disclosure policy.