OnDemand WTP Pricing Research

Will Latest Netflix Price Hike Spur Customer Backlash? | Variety

Netflix is rolling out its biggest price increase to date — including hiking the standard HD plan from $10.99 to $12.99 per month — for all subscribers in the U.S. and parts of Latin America.

The obvious risk: Some customers will see the higher prices as a reason to bail on Netflix, while there’s also the chance the increase will put a damper on new subscriber acquisition. Is the subscription VOD leader pushing its luck?

Netflix, which has reams of data at its disposal to make such business decisions, appears confident that the risk of any consumer backlash is outweighed by the substantial lift in revenue it’s expecting with the fee increases. Analysts project Netflix will see around $1 billion in additional top-line revenue in 2019 from the rate hikes, assuming there’s not a mass exodus of subscribers.

And investors are bullish on Netflix’s move to flex its pricing biceps: The stock rose 6.5% on Tuesday, to close at a three-month high of $354.64 per share.

Sure, nobody is really happy about paying more for what’s ostensibly the same product. But analysts noted that even at $12.99 per month, Netflix’s standard plan represents a great entertainment value, especially compared with traditional pay-TV bundles. And its most popular plan is still two bucks less than HBO Now ($15 per month).

“We don’t believe that [the price increases] will slow subscriber growth, as the new price points remain competitive relative to Netflix’s volume of original and licensed content,” said Neil Begley, SVP at credit rating firm Moody’s.

With Netflix’s U.S. subscriber base at around 60 million, an average monthly increase of $1.50 per sub would bring in $90 million more per month — or $1.08 billion per year in the U.S. alone, per Begley’s assumptions. And to the extent that Netflix raises prices in international markets, that top-line number could more than double, he added. Begley believes Netflix will reach 200 million total paying subscribers in 2021 and will achieve break-even free cash flow by 2023.

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Will Latest Netflix Price Hike Spur Customer Backlash? – Variety.