Why Netflix Raised The Price of It’s U.S. Subscription And Is It A Mistake?
31 October 2020
Netflix currently has more than 65 million U.S. subscribers and about 195 million paid subscribers worldwide – a 23% increase compared to a year earlier.
Their last hike for the U.S. price was in January 2019.
Fees Raised for HD, 4K Tiers, Not Entry Level
The second time in around two years, Netflix had raised its prices for its main U.S. subscription. The plan with HD viewing is increased to $13.99 a month—an increase of about $1 for the HD viewing.
The 4K tiers of service increased to $17.99. A $2 increase.
The entry-level price stays the same at $8.99.
Reason For The Increase
“We’re updating our prices so that we can continue to offer more variety of TV shows and films — in addition to our great fall lineup. As always we offer a range of plans so that people can pick a price that works best for their budget.” – Netflix
Netflix says that they update their price to continue to offer more variety of TV shows and films.
They said that the range of plans still offers people selection for a price that works best for their budget.
It is not a surprise that Netflix is increasing the monthly subscription in the U.S. After all, their business model is about making as good content as possible so that it will attract more subscribers and at the same time, keep the existing ones. And contents require cash.
Is Raising Price A Mistake?
In the past, Netflix’s range of shows is not as much as today.
Currently, Netflix seems to be more confident that raising prices will not hamper growth too much, given the larger amount of original shows it produces.
And based on past data, despite an increase in prices in the past, their subscriber count has steadily increased.
However, with an added increase in Disney+ competition, there will likely be some churn – albeit likely not much – because they still keep the entry-level price the same for people with a lower budget in the U.S.
Unlike Facebook, Netflix content is not user-generated.
Netflix business model requires them to continue funding more content to compete against competitors such as Disney+, Apple TV+, Peacock, and HBO Max.
Disney+, by the way, has a much cheaper plan that is even lower than Netflix, starting at $6.99 a month.
In a business like Netflix, having superior content is one way to keep the user staying on board.
That is why the only logical way for Netflix to keep competing is via a price increase.
Was this article useful for you?
If it is, appreciate it if you could take one minute to share the above article on Facebook by clicking here.
The information provided is for educational and general information purposes only and is not intended to be personalized investment or financial advice. We make no promises as to the accuracy or usefulness of the information we present.
Important: Please read our full disclaimer.
Chris Lee Susanto
More from Chris
Who is Chamath Palihapitiya? Chamath is a former Facebook executive who became a venture investor. How to invest like Chamath […]
Scientists have discovered that emotions are generally caused by our own thoughts. That means that two people in the same situation […]
For stock investors, I am a firm believer in having an optimized routine that supports us emotionally and rationally – so we can hopefully […]
2020 has been another great year for my portfolio. My portfolio is up around 81.24% for the year compared to the S&P 500 total […]
20. Does Warren Buffett Invest In Options? Yes, But It’s Not What You Think Most people will not associate The Oracle of Omaha […]
Options, Weapon of Mass Destruction? Most people will not associate The Oracle of Omaha with options. Because after all, options are […]
Bitcoin can be considered the world’s best-known cryptocurrency. Today is the 21st of November, 2020 and coincidentally, Bitcoin supply is also […]
I have been wanting to buy the Oculus Quest for the longest time. A few years ago, when Oculus first came out with The Oculus Quest, I wanted to […]
Based on the current trend of the mail-in ballots, it seems likely that Biden is going to be the victor of the US election in
Being an avid follower of many investment and finance blogs or websites in Singapore, I thought why not I create an
1. Long-Term Challenge With Media Division The first thing that comes to mind when we hear SPH is the newspaper. And newspaper makes money through […]
There are many value investing lessons that I have learned throughout these past five, six years. For today, I thought to share with you eight of the value investing lessons […]