On Friday, Netflix announced it has raised prices on all of its subscription plans, with the highest-quality plan now costing users $19. 99 per month. The basic plan, which only allows for standard definition video, is now $9.99. Netflix says its most popular plan, which allows for 1080p HD video, is not $15.49. A spokesperson for Netflix stated that they are updating their prices to ensure we continue to offer quality entertainment options. For prices, “updating”, is a synonym for “raising.” Netflix’s motive for increasing prices is quite simple. The company’s share price rose by three percent following the announcement. This is all you really need to know about Netflix and why it keeps increasing the price for a service that has been essentially unchanged for over a decade. It must make shareholders happy.
This has become more difficult as subscribers growth has slowed .. It’s not easy to find new subscribers when you have the largest streaming service. It would seem like this would be a win. But shareholders want growth even if you are already as large as you can reasonably get.
That is the law of large numbers. If you already have 214 million subscribers, which Netflix said it had in October 2021, it’s very hard to continue growing at the same rate as when it had, say, 50 million, or even 100 million.
To be clear, not all subscribers are the same. Then again, a large portion of people who don’t pay for Netflix is streaming Squid Game anyway, using someone else’s account–usually a parent, or roommate, or former girlfriend. According to some estimates, as high as a third share a password .. That means there are as many as 70 million people who are using Netflix without paying.
Instead, Netflix has decided the easier path to growing revenue is to simply charge its existing customers more money for the same service. However, eventually, people will stop paying whatever Netflix charges. Although I don’t know what this amount is, I am surprised that we have not reached it. Netflix has raised the price for its top plan by $8. 00 in the past five years.
The obvious question is whether Netflix offers additional value for its higher price. It all depends on your definition of value. The company isn’t adding any