<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Netflix (NASDAQ: NFLX) has been the most popular streaming video on demand (SVOD) service since its launch in 2007. As the elder statesman of the streaming space, it has set many of the norms for the industry. For a while, that included pricing.” data-reactid=”11″>Netflix (NASDAQ: NFLX) has been the most popular streaming video on demand (SVOD) service since its launch in 2007. As the elder statesman of the streaming space, it has set many of the norms for the industry. For a while, that included pricing.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="But Netflix has periodically hiked its subscription fees over the years, and not all of its competitors have followed suit. Now, new rivals are poised to enter SVOD at lower price points, even as investors process last quarter’s disappointing Netflix subscriber figures. Does the company have a pricing problem?” data-reactid=”12″>But Netflix has periodically hiked its subscription fees over the years, and not all of its competitors have followed suit. Now, new rivals are poised to enter SVOD at lower price points, even as investors process last quarter’s disappointing Netflix subscriber figures. Does the company have a pricing problem?
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What should Netflix cost?
Netflix debuted at a price of $7.99 per month — just over $11 in today’s dollars. There have been a few price hikes since then, though only the most recent — just this year — raised the price of that baseline plan. Previous hikes affected only the pricier two tiers. Netflix’s middle plan is its most popular, and that price has gone up three times since its introduction.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Past Netflix price hikes have generated some grumbling, but the company has never suffered much — until, perhaps, now. In the second quarter, it announced disappointing subscriber figures and actually posted a net loss of subscribers in the United States. Was the latest price hike to blame?” data-reactid=”27″>Past Netflix price hikes have generated some grumbling, but the company has never suffered much — until, perhaps, now. In the second quarter, it announced disappointing subscriber figures and actually posted a net loss of subscribers in the United States. Was the latest price hike to blame?
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="It certainly seems to have been a factor. In a letter to investors, the company conceded that areas affected by the price hike missed subscriber projections by "slightly more" than other regions. Netflix raised its price in the U.S. and in about 40 Latin American markets. While the price hike was announced in January 2019, it rolled out to existing customers months later, which is why the second quarter figures are relevant.” data-reactid=”28″>It certainly seems to have been a factor. In a letter to investors, the company conceded that areas affected by the price hike missed subscriber projections by “slightly more” than other regions. Netflix raised its price in the U.S. and in about 40 Latin American markets. While the price hike was announced in January 2019, it rolled out to existing customers months later, which is why the second quarter figures are relevant.
Cheaper competition
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Hulu, Netflix's first true competitor, launched in 2008 with a bold proposition: free streaming. By 2010, though, Hulu killed off its free subscriptions and kept only its paid SVOD option, which had debuted later on. It has not stopped trying to undercut Netflix, though: The service actually lowered the price of its SVOD subscription earlier this year in an apparent response to Netflix raising its own prices (Hulu increased the price of its live TV service at the same time, but that is a less-direct competitor to the exclusively on-demand Netflix).” data-reactid=”30″>Hulu, Netflix’s first true competitor, launched in 2008 with a bold proposition: free streaming. By 2010, though, Hulu killed off its free subscriptions and kept only its paid SVOD option, which had debuted later on. It has not stopped trying to undercut Netflix, though: The service actually lowered the price of its SVOD subscription earlier this year in an apparent response to Netflix raising its own prices (Hulu increased the price of its live TV service at the same time, but that is a less-direct competitor to the exclusively on-demand Netflix).
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Netflix hasn't had much trouble staying more popular than its cheaper counterpart. Soon enough, though, Hulu won't be the only major streaming service with a low price tag. Walt Disney (NYSE: DIS) is set to release Disney+ this year, which will reportedly feature a smaller content library than Netflix and a smaller price to match: $6.99 per month. Disney also controls Hulu.” data-reactid=”31″>Netflix hasn’t had much trouble staying more popular than its cheaper counterpart. Soon enough, though, Hulu won’t be the only major streaming service with a low price tag. Walt Disney (NYSE: DIS) is set to release Disney+ this year, which will reportedly feature a smaller content library than Netflix and a smaller price to match: $6.99 per month. Disney also controls Hulu.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="There's plenty of reason to worry about subscription fatigue in a streaming market that is poised to become exponentially more fractured. But subscription fatigue isn't just about options — it's also about price. It seems safe to say that cheaper services make more appealing additions to multi-subscription households. Granted, not all of Netflix's new competitors are going cheap: AT&T‘s WarnerMedia is reportedly plotting an eyebrow-raising price of $16 or $17 per month.” data-reactid=”32″>There’s plenty of reason to worry about subscription fatigue in a streaming market that is poised to become exponentially more fractured. But subscription fatigue isn’t just about options — it’s also about price. It seems safe to say that cheaper services make more appealing additions to multi-subscription households. Granted, not all of Netflix’s new competitors are going cheap: AT&T‘s WarnerMedia is reportedly plotting an eyebrow-raising price of $16 or $17 per month.
Netflix’s dilemma
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="There have been cheap streaming services before. Some, like AMC‘s Shudder and NBCUniversal’s now-defunct Seeso (NBCUniversal is owned by Comcast) have targeted specific genres. Cheap services were often positioned to be supplementary — supplementary, presumably, to the mega-popular Netflix.” data-reactid=”34″>There have been cheap streaming services before. Some, like AMC‘s Shudder and NBCUniversal’s now-defunct Seeso (NBCUniversal is owned by Comcast) have targeted specific genres. Cheap services were often positioned to be supplementary — supplementary, presumably, to the mega-popular Netflix.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Stephen Lovely owns shares of AT&T and Netflix. The Motley Fool owns shares of and recommends Netflix and Walt Disney. The Motley Fool has the following options: long January 2021 $60 calls on Walt Disney and short October 2019 $125 calls on Walt Disney. The Motley Fool recommends AMC Networks and Comcast. The Motley Fool has a disclosure policy.” data-reactid=”41″>Stephen Lovely owns shares of AT&T and Netflix. The Motley Fool owns shares of and recommends Netflix and Walt Disney. The Motley Fool has the following options: long January 2021 $60 calls on Walt Disney and short October 2019 $125 calls on Walt Disney. The Motley Fool recommends AMC Networks and Comcast. The Motley Fool has a disclosure policy.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This article was originally published on Fool.com” data-reactid=”42″>This article was originally published on Fool.com
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