Latest / Inflation Explained with Fexingo: CPI, Prices, and the Cost of Living for Everyday People / Why Your Streaming Subscriptions Get More Expensive
Transcript
- Lucas: You know, Luna, I was looking at my credit card statement last night, and I realized I'm now paying more for streaming services than I am for my actual electricity bill. Luna: That's a striking comparison. And I bet you're not alone. It feels like every month there's another email: 'Your subscription price is changing.' Lucas: Exactly. And what's interesting is that this is happening even as the broader inflation picture seems to be cooling. The 10-year breakeven inflation rate—that's the market's expectation for average inflation over the next decade—has dipped to 2.26 percent as of yesterday. That's down from 2.29 just a few days prior. Luna: So the market is saying, 'Hey, we think inflation is going to settle down.' But our inboxes and bank accounts tell a different story when it comes to entertainment. Lucas: Right. And the CPI data from May, released a few weeks ago, actually backs that up. The overall CPI index hit 334.0, up from 332.41 in April. That's about a 0.5 percent monthly increase. But when you dig into the subcomponents, the 'subscription services' category is rising faster than the headline number. Luna: I've seen that. The Bureau of Labor Statistics breaks it out. It's not just Netflix and Disney+—it includes things like Spotify, cloud storage, even some digital news subscriptions. Lucas: Precisely. And the year-over-year increase in that category has been hovering around 6 to 7 percent, while overall CPI is at about 4.2 percent. So streaming is outstripping general inflation by a sizable margin. Luna: Why? I mean, these are digital products. There's no raw material cost, no shipping container. Why are they getting more expensive? Lucas: Great question. Let's start with the obvious one: content costs. Netflix alone spent around $17 billion on content in 2025. That's up from $13 billion in 2021. And Disney+ is in a similar boat. When you're producing or licensing high-budget shows and movies, those costs don't stay flat. Luna: And they're also dealing with debt. A lot of these companies took on massive debt to fund content during the streaming wars. Now they need to generate cash flow to pay it down. Lucas: Exactly. The era of 'growth at all costs' is over. Wall Street is demanding profitability. So companies are raising prices, introducing ad-supported tiers, and cracking down on password sharing. All of that translates to higher revenue per subscriber—or, in the case of password sharing, converting freeloaders into paying customers. Luna: Which is basically a price hike for households that were sharing accounts. So even if the list price stays the same, your actual cost goes up. Lucas: Right. And there's another structural factor: sports rights. Live sports is one of the few things that still commands appointment viewing, and the prices for those rights keep skyrocketing. Amazon paid $1.2 billion a year for Thursday Night Football. Apple got Major League Soccer for $250 million a year. Those costs get passed on. Luna: But here's the thing that bugs me: a lot of these services are also introducing ads. So we're paying more AND watching commercials. That feels like a double dip. Lucas: It is. But from the company's perspective, the ad tier brings in two revenue streams: the subscription fee and the advertising revenue. It's a way to monetize the less price-sensitive viewers while still capturing revenue from those who want an ad-free experience at a higher price. Luna: So the strategy is basically price discrimination. And it's working, because their average revenue per user is going up. Netflix reported that ARPU in the US and Canada was up 8 percent year-over-year in their last quarter. Lucas: That's the number that matters. And it's why we should expect these price increases to continue. Because as long as churn remains low—and it does, people grumble but they don't cancel—the companies have pricing power. Luna: And that's the key insight for inflation watchers: pricing power isn't just about input costs. It's about how essential a service feels to consumers. And right now, streaming feels essential to a lot of households. Lucas: That's a really good point. And it ties into something we've talked about before on this show: the concept of 'sticky' inflation. Some prices are more resistant to change, either up or down. Streaming subscriptions appear to be sticky on the way up. Luna: So what does this mean for the Fed? If core services inflation remains elevated because of things like streaming, rent, and insurance, the Fed might be hesitant to cut rates even as goods prices stabilize. Lucas: That's exactly the debate right now. The Fed chair, Kevin Warsh, just held his first meeting last week. The market is parsing his comments for any signal about rate cuts. But if the core PCE price index—which hit 129.6 in April, up from 129.32—continues to creep higher, the Fed will stay cautious. Luna: And streaming is a small piece of that, but it's emblematic of a broader trend: the things we spend our disposable income on are shifting. We're buying fewer physical goods and more services and digital subscriptions. And those are harder to measure and harder to predict. Lucas: Absolutely. And that brings me to something I wanted to mention. This show is ad-free, and we want to keep it that way. But that's only possible because of listeners who choose to support us. If you've found our breakdowns helpful—whether it's on streaming prices or rent or the breakeven rate—consider buying us a coffee. It's at buy me a coffee dot com slash fexingo. Just a simple way to keep this independent economics coverage going. Luna: Yeah, it really makes a difference. And it helps us keep the focus on the data without any sponsor influence. So thank you to anyone who's already chipped in. Lucas: Alright, back to streaming. One more factor I want to touch on: bundling. A few years ago, everyone wanted a la carte. Now we're seeing the return of the bundle. Disney is offering Disney+, Hulu, and ESPN+ together. Apple One bundles music, TV, and storage. That actually complicates the CPI measurement. Luna: How so? Because the bundle price is lower than the sum of the parts, but the CPI might only track the individual prices? Lucas: Exactly. If a consumer switches from individual subscriptions to a bundle, their actual spending might go down, but the CPI might not capture that because it's tracking the list price of each component. So there could be a substitution bias in the inflation data for this category. Luna: That's a great nuance. So the official inflation number might overstate the real burden on consumers who are savvy about bundling. But not everyone is—or wants to be locked into one ecosystem. Lucas: Right. And that's the tension. The CPI is a fixed basket model. It tries to hold quality and quantity constant. But when the product itself is changing—new features, new tiers, new bundles—it's really hard to measure pure price change. Luna: So what's the takeaway for our listeners? Should they expect their streaming bills to keep going up? Lucas: In the short term, yes. The content arms race isn't over, sports rights are still escalating, and the push for profitability is real. But over the long term, we might see a ceiling. Consumers only have so much time and money. If prices keep rising, eventually people will cut back. We're already seeing some of that in the form of 'subscription fatigue'—people rotating services rather than stacking them. Luna: So the market might self-correct. But for now, the trend is clear: your streaming bill is rising faster than the cost of almost anything else in your budget. Lucas: And that's a useful reminder that inflation isn't uniform. Even as the headline rate cools, certain pockets of the economy are still running hot. For us, that's the story worth telling.