Study suggests Netflix’s new price increase will send subscribers fleeing
Without question, Netflix is still growing at an impressive clip. During the company’s earnings report yesterday, the streaming giant revealed that it added 8.8 million new subscribers during the holiday quarter. Notably, nearly 84% of that subscriber growth came from overseas.
Eventually, though, subscriber growth will begin to plateau, which is to say that the company will need to find other ways to boost revenue. One obvious solution is to increase the price of a monthly subscription, something Netflix did just a few days ago. In case you missed it, Netflix this week announced its biggest price hike in history, with the basic plan jumping from $7.99 to $8.99 a month, the standard plan jumping from $10.99 to $12.99 a month, and the premium plan jumping from $13.99 to $15.99 a month.
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Netflix’s price hike raises an interesting question: at what price point will subscribers start leaving the service? Personally, I think Netflix still has a lot of wiggle room when it comes to pricing, especially when you consider that an HBO Now subscription costs a whopping $14.99. Beyond that, Netflix’s growing stable of original content — along with its sizable library of licensed TV shows and movies — arguably provides the best bang for the buck among all streaming services.
All that said, a recent survey suggests that Netflix could stand to lose a significant number of subscribers with even a mild price hike. According to data from the research firm The Diffusion Group — which was compiled before Netflix’s most recent price hike — 8% of respondents indicated that they’d leave the service if the cost of a subscription went up even $1 a month. Meanwhile, another 8% of respondents said that they would move to a lower tier in the face of a price hike. What’s more, a whopping 16% of respondents said they’d leave the service if Netflix implemented a $3 price hike.
“While TDG believes that Netflix will endure any short-term backlash from these increases, it is undoubtedly reaching a level of price resistance across all tiers,” TDG president Michael Greeson said.
The data is interesting, but I don’t exactly find it persuasive. As it stands now, Netflix’s subscriber base stands at 139 million. The notion that 11 million subscribers will bolt with a small $1 increase just doesn’t seem plausible. What’s more, there has been no evidence that any of Netflix’s previous price hikes have done anything to reduce membership in a material way. Obviously, Netflix can’t keep raising prices indefinitely, but the recent price hikes seem objectively fair given the insane amount of content available to subscribers.
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