Good morning. Netflix announced a bump in subscription fees this week as the streaming giant’s quarterly earnings revealed a big swing on live sports is paying off. But as its rivals follow suit, price hikes are testing the limits of cost-conscious viewers.
More on the streaming wars and the weight on our wallets below – as well as a rundown of today’s potential trade drama.
Also in the news
Amazon Canada is closing all seven of its Quebec warehouses and laying off 1,700 permanent staff in a move being criticized as an anti-union measure by the company.
Canada’s financial intelligence unit has found that fentanyl is increasingly being produced in North America, including in Canada.
Canada Post is working with the federal government about how to mitigate its financial woes.
On our radar
- Statistics Canada reports November core retail sales, which could offer signs of household financial stress.
- Earnings include General Electric Corp., one of the original 12 companies to debut on the Dow Jones on May 26, 1896.
Economy
Trump takes the mic in Davos
U.S. President Donald Trump is scheduled to address hundreds of the world’s top decision-makers this morning at the World Economic Forum in Davos, Switzerland.
The summit opened on the same day as Trump’s inauguration, bringing into sharper focus planned discussions on “reimagining growth, safeguarding the planet, and rebuilding trust.”
Foreign leaders have largely spoken to an audience of one during their subsequent speeches and appearances, highlighting the mutual benefits of relatively open trade policies between the U.S. and their respective countries.
Today, Trump turns the mic on them. In a video appearance set for 11 a.m. ET, the new president will address over 900 of the world’s top chief executives, more than 50 heads of state, and dozens of leading voices in economics, civil society, and climate change – all seeking clarity as souvenirs from this year’s conference.
Trump’s remarks have centred on an “America First” policy that promises sweeping changes to industries in the U.S. and worldwide, but which are, in many cases, destined to hit legal and economic roadblocks.
- His dream of ramping up the U.S. oil and gas sector, for example, might run into geological, financial, and logistical limitations to massive increases in production, our energy and economics team reports.
- Even if the U.S. were to “drill, baby, drill,” as the president is fond of saying, he would find crude markets frowning over oil’s outlook, owing to a combination of slowing demand growth and increased production from non-OPEC nations.
- Investors also want to see dividends and buybacks – not more money pouring into the ground.
Canadian leaders are divided over how forceful the country’s retaliation should be in the event Trump imposes tariffs on Feb. 1, but unified at least conceptually over fighting back.
Characters in the Netflix sensation Squid Game presumably looking at their new subscription bills.Netflix
In focus
How high can streaming services raise prices?
In a call with analysts on Tuesday, Netflix co-CEO Ted Sarandos defended the platform’s latest price hikes as necessary to ensure increased quality. “When you’re going to ask for a price increase, you better make sure you have the goods and the engagement to back it up,” he said.
The new prices take effect immediately for new subscribers, while existing members will see the change on their next bill.
- The standard plan with ads, the service’s cheapest offering in Canada is going up by $2 to $7.99.
- The standard plan without ads will increase by $2.50 a month to $18.99.
- The premium plan is up $3 a month to $23.99.
The move might put to the test a cost-conscious consumer base that is also paying more for rivals like Apple TV, Disney+, and Amazon Prime. I spoke with Barry Hertz, The Globe’s deputy arts editor, about how much viewers can bear before streaming brings financial strain reminiscent of the cable model it once disrupted.
Chris: Did this week’s price hike surprise you, and do you think it’s justified?
Barry: I don’t know if it’s a surprise, but I don’t think it’s justified. Netflix has been spending billions of dollars on programming for years – whether it’s original content or acquiring catalogs from other studios. Their content spend is easily upwards of US$4- to $5-billion in a mild year. Unless they’ve bought a planet and are paying to send MrBeast there to film something, this doesn’t hold water.
I think this is more about what the rest of the landscape is doing. Netflix sees competitors raising prices and feels they can do the same. They have the best content in terms of depth and quality – Disney and Amazon can’t match that. They’ve also done their market research and know Netflix is the last streaming service people are likely to cut.
Chris: In a cost-conscious environment, do you think Netflix can continue to hike prices without alienating subscribers?
Barry: Probably. Netflix knows it’s the default streaming service for most households. Everyone has their price point, though. If it starts feeling like cable again – where people were paying around $50 and wondering, “What am I doing?” – then you’ll see some pushback. Streaming has become such a part of people’s lives that they’re willing to pay more to keep it, at least up to a point. Netflix is banking on that attachment, but it would take a noticeable dip in quality or a much bigger jump in price for people to seriously consider canceling.
Chris: Competitors like Disney+, Amazon Prime, and Apple TV+ have also raised prices. Is this a trend driven by increased costs or something else?
Barry: Partly, yes, but I think it’s also about positioning themselves for mergers or acquisitions. No streamer is lowering prices. Everyone is trying to make their offerings attractive for potential buyouts. In the next few years, I think we’ll see fewer streaming services as companies merge or smaller players are gobbled up.
You could imagine a scenario where Apple buys Disney – not just the streaming service, but the entire company. Apple’s market cap is so massive that it could swallow an entertainment giant without much impact.
Chris: Netflix led a disruption of traditional cable, but now we’re essentially building our own cable bundles by subscribing to multiple services. How much can the market bear before this model collapses?
Barry: That’s a great point.
Chris: Thank you.
Barry: Streaming was supposed to be cheaper than cable, but now people are subscribing to three or four services and paying similar amounts. Everyone has a pain point, though. Netflix is betting that it’s worth the price because it’s become part of people’s lives.
Chris: This is one price hike, but what do you think it says about the industry’s direction?
Barry: I’m curious about the smaller streamers we don’t hear much about – like Crave in Canada, which I’ve been covering for its 10th anniversary. It’s a fascinating example of how smaller players operate in this space.
And I also want to point out that the streaming landscape isn’t static. People still go to theatres for major events, so the idea that streaming has “killed” traditional entertainment formats isn’t entirely true. Streaming is a huge part of people’s lives, but it’s not the only way they consume content.
Charted
Canada’s disappearing entrepreneurs
No risk, no reward. At the core of wealth creation, which funds the various social programs that contribute to Canadians’ standard of living, are entrepreneurs. John Ruffolo, founder of Maverix Private Equity, says entrepreneurs rely on a supportive infrastructure in shouldering the risks associated with founding new businesses. This includes public policies that ideally facilitate, rather than frustrate, their ambitions, said Ruffolo, who is also the co-founder of the Council of Canadian Innovators. “The decreasing trend observed in the accompanying chart is therefore extremely concerning.”
Bookmarked
On our reading list
In Jasper: Winter-sport lovers are kickstarting tourism in the region but visitor numbers are still “below the norm” after the summer’s devastating forest fires.
On the market: Carolyn Ireland on the art of relisting a home.
In good spirits: Is the LCBO the largest purchaser of alcohol in the world?
Morning update
Global stocks were mixed as investors tapped the brakes on a rally sparked by U.S. President Donald Trump’s mammoth AI spending plans and set their sights again on tariff uncertainty. Wall Street futures were subdued, while TSX futures pointed higher.
Overseas, the pan-European STOXX 600 was up 0.12 per cent in morning trading. Britain’s FTSE 100 declined 0.09 per cent, Germany’s DAX rose 0.27 per cent and France’s CAC 42 gained 0.28 per cent.
In Asia, Japan’s Nikkei closed 0.8 per cent higher, while Hong Kong’s Hang Seng slid 0.4 per cent.
The Canadian dollar traded at 69.45 U.S. cents.