Netflix Increases its Prices: Is it Worth It?
By Leila Gabrys
It’s no argument that Netflix has been delivering exceptional entertainment to its subscribers in the past couple of years. However, the price of the standard subscription to Netflix increased from $9.99 per month up to $10.99 in November of this year. This is mainly because the multi-billion dollar industry plans to release dozens of new shows in 2018. This is a main factor of the increase in demand by most subscribers. Though slightly annoying to subscribers, people, including my family, are still very willing to add on their extra dollar every month to be able to binge this new content. The hype that hit shows such as Stranger Things and 13 Reasons Why have brought to Netflix’s reputation has definitely set the stakes high for other video streaming companies to match.
This is not the first time the company has increased its subscription price. In 2011, the company chose to up their price from $9.99 to $16, which provided the packaged deal of the standard shipping of DVDs in the mail and the online streaming. This being a 60% increase in the price led to a total loss of 800,000 subscribers, stalling their economic growth, according to the Huffington Post. In 2015, Netflix also upped its lowered price of the standard $7.99 to the current price of $9.99.
However, Netflix has discovered newer ways of providing entertainment: by producing shows itself. 2016 was one of Netflix’s biggest years, as it released the first season of the hit show Stranger Things (seen above) and the second season of Narcos. The company gained 3.6 million subscribers and a record of $2.15 billion in revenue the third quarter, just after the release of these two shows. "Stranger Things is also notable as it is produced and owned by Netflix, which provides us with more attractive economics and greater business and creative control," says the company, according to The Verge. Netflix used this strategy of creating more original shows this past year, including 13 Reasons Why and The Crown, and plans to continue with it throughout 2018.
Because of the increase in upcoming content this next year, it’s no surprise that Netflix is upping the price to expand their budget. Sandra Gonzales via Twitter writes, “Ted Sarandos says Netflix's content budget will be "closer to $7 billion" next year.” It’s in the news that the company strategically planned their up in price to be in effect just before the release of the sophomore season of Stranger Things on October 27th. The recent final trailer has most people on the edge of their seats, itching to binge the new content fans have been waiting for for a year and a half. Planning to the up the price just before the release is a clever idea to squeeze the cash out of people’s pockets. The newer features have also been a factor in the cost of a standard subscription, such as downloads and interactive content, according to Mashable. However, not even these great features and extraordinary shows and movies can keep everyone a loyal Netflix binger. The up in the price causes competition with other video streaming services such as Amazon's Prime Video and HBO Now, which offer different shows and features. However, most people don’t need to think about this opportunity cost too much before deciding the Netflix arguably delivers the best and most exclusive content as a whole.
Netflix began informing its subscribers on October 19th of the increase, just 30 days in advance before the price actually goes up, according to their billing cycle. In their third quarter, Netflix reported having 109.25 million subscribers, which we may see a change in due to this increase. However, if Netflix continues to live up to their extremely high reputation and deliver exceptional shows, the company will see increase in profit, and therefore, hopefully an increase in subscribers.
Works Cited
Abbruzzese, Jason. “Netflix Is Raising Its Prices, Again.” Mashable, Mashable, 5 Oct. 2017, <http://mashable.com/2017/10/05/netflix-raising-prices-again/#w.goyvcCIsq0>
Gilbert, Jason. “Netflix Account Losses Much Higher Than Expected After Pricing Backlash.” The Huffington Post, TheHuffingtonPost.com, 24 Oct. 2011, <www.huffingtonpost.com/2011/10/24/netflix-account-losses-q3-2011_n_1029269.html>
Katz, Brandon. “Netflix Price Increase Leading To 500,000 Cancellations?” Forbes, Forbes Magazine, 13 July 2016, <www.forbes.com/sites/brandonkatz/2016/07/13/netflix-price-increase-leading-to-500000-cancellations/>
O'Brien, Sarah Ashley. “Netflix Is Raising Its Prices.” CNNMoney, Cable News Network, 5 Oct. 2017, <http://money.cnn.com/2017/10/05/technology/business/netflix-price-increases/index.html>
Pereira, Chris. “Netflix Has Increased Its Price In The US Ahead Of Stranger Things: Season 2 Release.” GameSpot, Gamespot, 8 Oct. 2017, <www.gamespot.com/articles/netflix-has-increased-its-price-in-the-us-ahead-of/1100-6453809/>
Popper, Zoya Teirstein and Ben. “Led by Stranger Things and Narcos, Netflix Reports Record Revenue.” The Verge, The Verge, 17 Oct. 2016, <www.theverge.com/2016/10/17/13305338/netflix-earnings-3rd-quarter-q3-2016>
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ReplyDeleteI think it's really interesting that Netflix decided to up the cost of subscription in preparation for new seasons of their original shows to premiere. It's a smart tactic considering many viewers have long awaited the new releases of their favorite shows, like Stranger Things, and demand has increased. I wonder if Netflix will continue to create their own shows to increase revenue and demand, or if they will just keep upping the cost of subscription. (Kat Van Hulle)
ReplyDeleteThis is a really interesting topic, and as a Netflix binge watcher I can relate to the debate in whether paying the extra dollar is worth it. Although it is only a dollar, money adds up over time and with the shows that are on Netflix now, and the shows in which are leaving I don't know if paying the $10.99 is worth it. I would find myself wanting t explore other options that could offer me more of the TV shows I enjoy to watch. Overall, this is a very good topic and I think you did a great job of referencing both sides of the argument.
ReplyDeleteLike you said, I think many people will continue their subscription with Netflix which is why Netflix is smart in doing this. People may be a little upset about the dollar increase, but I don't think that it will change their subscription base. People enjoy the shows that Netflix is producing and therefore while they may not be happy to be paying the extra dollar each month, it ultimately will benefit them with the greater budget set aside to produce these new Netflix shows.
ReplyDeleteNetflix has been charging their price of $9.99 since 2014. Compared to cable companies and other network providers this is only a fraction to pay. As Netflix expands and plans to keep adding more to their company, the amount that you're getting for such a low price is pretty extreme. The price increase of $9.99 to $10.99 is literally one dollar. One. Dollar. If Netflix was worth it for $9.99(which it was), then I'm sure people will be willing to search their couch cushions for that one extra dollar.
ReplyDeleteEven though Netflix continues to raise their prices, they still seem to be making revenue, because of their inelastic demand. People keep saying they are upset but most of them put up with it because of the great content Netflix shares with us viewers. They usually update their seasons quickly and make new shows for themselves. Netflix is experiencing competition from subscriptions to Amazon Prime. So they are starting to release more shows that Netflix produces in order to hopefully draw back some customers. So hopefully with the increase in supply there will be more of a demand for getting a Netflix subscription.
ReplyDeleteI have Netflix and didn’t even know this change was coming, though I’m not surprised because it has become so popular in the past couple years bringing in a lot of revenue. Being one of many avid watchers of Netflix, have been very impressed with Netflix and the shows they have, but recently they have removed a lot of my favorite shows and movies. Netflix has the great opportunity to increase their price for subscription at a time like this in their prime, and most people will most likely keep their subscription, though there are other subscriptions out there that cost less and have some newer shows available the next day, not having to wait months to watch your favorite show. I see why they raise their price and why subscribers will continue to pay even if it is more expensive, but there are great alternatives since that extra dollar adds up throughout the years.
ReplyDeleteAlthough Netflix is getting pretty pricey you are right in stating that people will continue their membership. My family will continue to purchase it and so will many others. Some may end their subscription, but Netflix can afford to lose a few subscribers.
ReplyDeleteI also agree with the fact that a lot of people still stay with Netflix because of their original shows and anticipation for upcoming seasons and shows.
I feel so though Netflix is continually raising their prices, every couple of years, so this isn't much of a shock to me. I agree with Alyssa, It's unfortunate Netflix keeps taking away such popular and valued shows and movies. You would think, that the more the price is raised, the more shows and movies would be added rather than taken away. However, I think Netflix may be in for it, as there are now many competitors like Amazon Prime, Fire Stick and You Tube TV, where you can get more shows, movies and other things for a similar price.
ReplyDeleteNetflix is smart that it increased its price. Many people may complain that Netflix is to expensive but they are still going to pay for Netflix as it has many shows that are available to the viewers. Many people in the world don't have time to watch TV or they might not have smart TV's, and for them Netflix is the only way they can watch the show. So even if Netflix increases its price, people are still going to pay for Netflix.
ReplyDeleteI was honestly very surprised with the billions of revenue Netflix is making. I personally have Netflix, however I never use it. My main issue is the lack of recent TV shows and movies which Netflix lacks in. Yes, Netflix is extremely convenient to watch anywhere and on any device, but there is not much to watch in my opinion. Most of the shows are not interesting and I personally believe that the majority of the movies are boring. After reading this article I am excited to hear that Netflix is adding many new shows and movies and I hope that they are actually good and worth watching and spending money on.
ReplyDeleteI really love Netflix because I know many people that got rid of their cable company and only use Netflix. There are some disadvantages but less money to pay. I like Netflix I just personally agree with Anahi that the only thing that is a bummer is there is a lag in new upcoming tv shows.
ReplyDeleteI really enjoyed reading about your topic and you incorporated economics into the article well. My family loves Netflix and even with the increase in price, they probably still won’t cancel the account. Therefore, I agree with the idea that Netflix will still be able to increase price while maintaining their large consumer group. In addition, because there is an increase of shows only exclusive to Netflix users like you said, Netflix has an advantage and will most likely continue to grow.
ReplyDeleteNetflix increasing their prices is a controversial topic that many people care about right now. It is no doubt that Netflix brings in revenue that allows the company to create much of their own content. While there may be a decrease in customers using the service because the price is marginally higher, Netflix still may have a growing customer base. As consumers grow accustomed to on-demand streaming, many are willing to completely forgo normal television in exchange for Netflix, a substitute. If this pattern continues, Netflix's profits will largely increase, allowing them to produce quality, in-demand content.
ReplyDeleteI see how increasing the quality of the content of Netflix's selection could lead to an increase in price, but does decrease overall consumer spending.
ReplyDeleteLike your family, I agree that Netflix's one dollar up-charge is still worth it. With only $12 more per year, there's really not much of an opportunity cost for customers. I also thought it was really interesting and smart how Netflix increased their price right as the second season of Stranger Things came out, which will allow Netflix to keep many more subscribers. Overall you chose a really good opinion piece.
ReplyDeleteI don't think it's a huge surprise that Netflix is nominally raising their prices every once in a while. They are a very successful company with tons of subscribers. My family is subscribed to Netflix and I use it all the time. I would also say that at least 75% of my friends' families are subscribed as well. With such a loyal customer base, it isn't as risky for Netflix to up their prices as it is for other businesses, as most see the price change as a small inconvenience, but no reason to end their subscription. However, another big topic surrounding Netflix currently is the removal of a lot of popular shows, which has customers pretty upset, so I would argue that now isn't the best time for them to add a price increase.
ReplyDeleteNetflix is part of a oligopoly market, meaning that few firms collectively control the market. They're interdependent, meaning that they have the ability to collaborate in the market to maximize all the firm's profits. WIth this price change, don't be surprised if Hulu, HBO now, and other raise their prices to compensate.
ReplyDeleteThe market for video streaming seems to be highly monopolistic competition. Netflix has a unique position of being able to set the price of their good (to an extent) despite there being other streaming sites because of the unique content that Netflix has been able to create. Prior to the many Netflix-Originals that are now on Netflix, competition was less monopolistic causing Netflix to be more of a price-taker, but they were actually able to shift their firm towards being monopolistic in order to increase power and profit.
ReplyDeleteBy Netflix having competition with other similar programs like: Hulu or HBO Firefox, having a dollar increase could potentially put their business in jeopardy. However, not many of the other programs are exactly as popular as netflix, maybe because of the increase others will think it's highly demanded, paying the extra fee and increasing their profits. In addition, because there are so many substitutes uprising in popularity, it's hard to say what the long run outcome will be due to the possible changes Netflix still has access to.
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