Lets Talk About Netflix And Its Pricing
Every year, streaming becomes more and more expensive — and just last week, fees began to rise once more. Netflix announced an instant price increase for new customers across all tiers, bringing the most costly plan to $20 per month. It’s the third price hike in as many years.
Netflix’s regular tier now costs $15.50 per month, slightly more than HBO Max ($15) and the Disney Bundle (which includes ESPN Plus and Hulu for $14), making it one of the most expensive on-demand streaming alternatives among major services. It gets even more expensive if you want 4K. According to recent research from Deloitte, the average person has four paid streaming subscriptions.
While the price hikes are inconvenient for customers, it’s safe to assume they’ll continue — particularly for Netflix. Growth potential have stagnated, while the company’s content investment has increased. To keep up, Netflix will either need to grow the number of paying members or ask its current users for more money. Netflix understands it can do it right now.
“They’re doing pretty well,” Parks Associates senior analyst Paul Erickson tells The Verge. “But they’ll continue to tighten up their budgets as time goes on.” “The primary way they do it is by making minor incremental price changes over time.” Because they believe they are well-entrenched and their clients are loyal, they do not believe it will have a significant impact on their subscriber base.”
“THE MONEY HAS TO COME FROM SOMEWHERE,” says the narrator.
One of the main reasons Netflix requires funds is to fund new shows and films. According to projections from consultancy Ampere Analysis, streaming services are spending a ridiculous amount of money on original programming, with worldwide spending estimated to top $230 billion in 2022. Ampere ranks Netflix as the third-largest video content investor, after only Disney and Comcast, who also invest in high-priced sports rights, according to the firm.
Streamers want to retain existing consumers while also attracting new members by investing large sums of money in unique programming. Netflix can be everything to everyone by diversifying its programming across genres and categories. Netflix maintains a monthly membership by investing in an ever-expanding library of scripted, unscripted, animation, and live-action programming.
“The more they can serve all of the different parts of different households — whether it’s language specificity, market and lifestyle particular,” Erickson adds, the better. This enables Netflix to maintain its status as a must-have entertainment service. And, based on its 200 million+ paid members, the strategy appears to be succeeding.
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However, there’s another reason Netflix has increased its prices to make more money. Netflix’s subscription growth has slowed, despite the fact that it has hundreds of millions of active users. The corporation continues to grow its subscriber base, but the number of new members added each quarter has decreased in recent years (in some cases, even falling below forecasted figures). Meanwhile, Netflix’s content budget continues to expand, with the corporation spending billions on programming each year. With significant competitors like Disney Plus and HBO Max entering the market, Netflix’s competition is only going to get stronger.
Investors are concerned about slowing subscriber and revenue growth, so this is likely to come up during the company’s earnings call later today. Netflix has to keep its impatient investors pleased in addition to paying for the content it needs to continue developing its business.
Without simply removing all of us from our ex-partners’ or parents’ plans — Netflix CEO Reed Hastings has described joint accounts as “something you have to learn to live with” — Netflix will have to find a method to pay off its loans.
“Somewhere the money needs to come from.” “Hard cash is the only way for a corporation to pay off its debt and achieve true profitability,” Erickson adds.
Small incremental price hikes every year and a half or so, on the other hand, are unlikely to affect subscriber turnover for a service that people use frequently or is key to their cord-cutting portfolio.
“Does the customer believe Netflix is a good value for the money?” If the answer is affirmative, “they can overwhelmingly raise prices and pretty much nobody quits,” says Michael Pachter, managing director at Wedbush Securities. “If you watch Netflix every day, you’re not paying attention.”
Price hikes in the past have indicated that another was on the way for US users in the near future. Additionally, Netflix COO and chief product officer Greg Peters stated on an earnings call last year that by providing “amazing entertainment value” through content and user experience, the company can “ask them to pay a little bit more to keep that positive cycle going” by periodically going back to its subscribers and “asking them to pay a little bit more to keep that positive cycle going.” In other words, Netflix delivered on its promise of a price rise, yet breaking into the teens is still a huge milestone for the streaming service.
Leaving aside Netflix’s decade-plus advantage over its competitors in terms of everything from watching data to catalog, almost every move the company makes is aimed at making its streaming service as addictive as possible, which, again, costs money. Netflix is pouring through cash to keep you hooked to its service, whether it’s increasing its sports offerings, taking huge swings with both critically acclaimed and up-and-coming directors, or expanding characters and worlds with games.
“They’ll keep innovating because now that they know they have to carry weight in the industry, weight for original content development — it’s not a fluke,” Erickson adds. “It’s proving to be feasible for businesses to continue to broaden their content offerings, even if it means straying from the typical quantities and sorts of information they’re used to delivering.”
In the streaming sector, Netflix has arguably unequaled brand devotion – it’s synonymous with streaming. Netflix merely raises its pricing by a buck or two every couple of years because it can. It’s safe to presume that it will continue to do so.
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