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
Snowflake does cloud computing that implements a variable pricing model, which can be at times more attractive than fixed packages […]
The adage that “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” by Benjamin Graham could not be more true over the past few days. As of 9 September 2020, […]
Yesterday (3 September 2020), the US market had its deepest one day decline since June. The S&P 500 and Nasdaq had their deepest declines since June 11 and for Dow, it was their biggest decline since June 26 […]
My Bet: In 2020, The Stock Market Will Not Crash Again. Yes, it is hard to predict where the stock market is heading in the short term. But my bet with regards to virus-related concern is that I do not think that we will crash again back to March-April Lows in 2020 just because of it […]
Think About How SIA Was When Times Was “Normal” Before we got into this COVID-19 mess, SIA is already not a great business to own even when times were “normal.” All of us know that the airline […]
In this article, I’d like to share eight signs of potential fraud in our stocks portfolio that we should be careful of. These are eight simple potential warning signs of bad financial reporting or early markers […]
3. As of 1H20, Most Earnings Paid Out As Dividends Based on AEM 1H20 reports, their cumulative capital allocation breakdown from 2017 to 1H2020 is as follows: Dividends – 47%, Acquisitions – 25%, Capex – 18%, Buybacks – 10%. It is interesting to note that […]
Eastman Kodak Company (NYSE: KODK) opened at $2.15 (Monday) on July 27, 2020, and closed at $33.20 (Wednesday) by 29 July 2020. That is a 1,444.19% increase over a two day period. In this article, I am going to give you some background on the Kodak company, the reason […]
Last Friday on 24 July 2020, Intel closed 16.24% down. Although I do not own any Intel stock, I was curious why it fell after releasing its Q2 2020 results. Just a while ago, I saw the news that after 15 years of partnership, Apple decided to break up with Intel and stop using its […]
1. Temasek Portfolio is Huge. Although I know that Temasek has a huge portfolio, I was surprised to see that it is around the size of Warren Buffett’s. As of 31 March 2020, the net portfolio value or NPV is at S$306 billion. So we have our own Warren Buffett in Singapore, that is […]
Who is Adam Smith? Adam Smith (1723-1790) was a philosopher and economist who was best known for authoring the book An Inquiry into the Nature and Causes of the Wealth of Nations. Wealth of Nations also happens to be one of Warren Buffett’s favourite books […]
As a value investor, as a practitioner of value investing, I am very interested in studying funds I view as an executioner of the various value investing methodologies I myself am very passionate about. In this article, I will list down some of the value investing funds in […]