Netflix: Confidence or Conundrum?
Yesterday Netflix announced its largest price increase since it launched its domestic online streaming service in 2012. US subscribers can expect a 13% to 18% hike in their monthly charges. For example, if you're on the Family Plan you used to pay $11 per month, and going forward the charge will be $13 per month.
Right, it's not a huge increase for most customers, but it signifies some pretty remarkable confidence that Netflix customers have less price elasticity than the average cable customer or cellular subscriber.
Hundreds of thousands of US homes have shed their cable and satellite bills in exchange for a la carte, Over-The-Top streaming services like Netflix. They did so for good reason: the sub fees demanded by programmers and the costs that were passed down to consumers often resulted in a range of channel offerings that the customer was forced to pay for and didn't want. So Netflix is assuming that these same "cord-cutters" or "cord-nevers" are going to pay more for their favorite originals on Netflix since they already see it as their primary source of TV entertainment.
We're already seeing a re-bundling of programming in OTT formats via services like YouTube TV, so something about the bargaining power of the content creators will likely still hold weight even as additional a la carte offerings emerge. Particularly as these conglomerates continue to consolidate.
Let's face it, there are only a certain amount of disposable income dollars that consumers are willing to spend on entertainment. While content consumption numbers are higher than they've ever been, there's always a limit. We are very close to finding out where the next generation of consumers draw the line.