Spending

Netflix Raised Rates 18%—Here's How to Know if It's Time to Call It Quits

John Schmidt

Netflix subscribers: Your bill is about to get more expensive.

Starting in January, Netflix began rolling out a new pricing model, which saw the monthly rate for its most popular, two-screen standard plan jump 18%—from $10.99 to $12.99.

Although the higher rates hit new subscribers first, those of us who have been going steady with Netflix à la Lara Jean Covey are about to enter a brave new world of on-demand pricing. All subscribers will be on the new pricing model by the time their bill comes due in May.

Why are prices going up?

Netflix is running through a lot of cash. To appease the binge-watching masses, it’s committed to spending more than $18 b-as-in-billion on content, according to “The New York Times.” For context, that’s roughly on par with the entire gross domestic product of Bosnia and Herzegovina.

While an extra $2 a month from Netflix’s 139 million subscribers may not be quite enough to cover its bill, that increase could have a bigger effect on your budget: Twenty-four dollars a year more may not seem like much, but small changes to subscription fees add up.

Americans already spend more than $2,800 on average annually on all kinds of subscription services, ranging from their cellphone service providers to cable to Tidal. According to Waterstone Management Group, about $240 of that goes to video streaming services like Netflix.

Add in growing competition from offerings like Disney+ and Apple TV+, and it’s important to take a closer look at how much you’re spending and which of those subscription services add the most value based on your viewing habits.

Related: Unsubscribe: How One Click Can Save You $500 This Year

Is Netflix worth it?

The average American shells out more than $3,000 on entertainment a year. So even under the new pricing model of $12.99 per month, a standard Netflix subscription ($155.88 before taxes) will account for just about 5% of consumers’ annual entertainment spending.

Given the amount of time Americans spend glued to their screens, streaming subscriptions aren’t necessarily a bad investment. The U.S. Department of Labor reports most of us spend almost three hours a day watching television, and StreamingObserver.com estimates 71 minutes of that is devoted to Netflix.

If you break it down mathematically, that’s roughly 432 hours of Netflix a year, which means that base subscription price works out to about 36 cents per hour of Netflix we watch. That’s about a 5-cent-per-hour increase from its old pricing model.

Other forms of entertainment cost you much more: The average movie ticket now costs $9.11, meaning you’re dropping about $4.56 per hour for a two-hour flick. “Avengers: Endgame,” for context, is a relative steal with a running time of just over three hours, dropping per-hour entertainment costs to $3.

In terms of live entertainment, the average Broadway ticket costs more than $100, or about $33 per hour of entertainment, while “Hamilton” tickets, which tend to run around $300, work out to $100 per 60 minutes of genre-redefining rap musical.

So what does all this mean for me?

What’s important when evaluating this or any cost is the concept of utility, or how much use you get out of something. Big expenses can suddenly become minimal when considering the context of how much you’re going to use them. And small expenses can add up when they go toward inferior products that don’t last or purchases you aren’t enjoying often.

Related: Frugal Fails: 6 Stories of Money-Saving Attempts Gone Wrong

You also don’t want to undervalue your enjoyment. While it’s possible to put a price tag on each hour of entertainment you get from something, there are some experiences that are simply priceless.

So while the Netflix price boost ends up being a small one spread across hours of use, it’s a good reminder to consider utility. Run those numbers based on your own habits, on Netflix and other services you use. You might just find that there’s one worth cutting, to help you create some room in your budget. Or even an opportunity to press pause on your relationship with Netflix, at least until the next season of “Stranger Things” debuts.

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