It’s that time of year again. No, not Halloween or the holiday season. It’s “Netflix is increasing prices” season.
Almost every year since 2014, Netflix has incrementally increased the cost of its most popular, “standard” plan. Last week, it announced the tradition is being kept alive; the “premium” plan will increase by $2 up to $17.99/mo, while the “standard” plan will increase by $1 up to $13.99/mo.
Over the last six years, Netflix’s “standard” plan has shot up from $8.99 upon release to $13.99 after last week’s announcement. That seems like a dramatic increase which would turn users off of the service, but the way the company has rolled out these increases has kept users on board. Rather than announce large price increases at once, Netflix has increased their “standard” price by around $1/yr on average. From 2015 to 2017 the price only rose $1/mo, whereas from 2017 to 2019 it rose by $2/mo.
The slow rollout of price increases has had a dampening effect on customer outrage. Facebook Talking About counts for Netflix show increases in discussion of Netflix around previous price increases; by the time the third increase was announced around October 5, 2017, Talking About Counts actually went down. The same happened both last week and in April of last year when increases were announced. Usually, an upward movement in Talking About Count is a good thing for a company, but not when there's news that might make people upset in the way a dramatic price increase would. Less people talking about Netflix after news of a price increase means people aren't that concerned about paying the extra $1.
Year after year, analysts predict that Netflix is getting too expensive and is pricing out users who turned to it over cable in hopes of saving money. But the message from consumers is clear: a $1/mo increase is not enough to turn them away, even if Netflix lacks a killer app in the way Disney+ has Marvel and The Mandalorian, Peacock has The Office and HBO has hits like Game of Thrones and Watchmen
Netflix’s Apple App Store ratings are lower now than they were at the start of 2015 thanks to a purge of old or bot reviews across the platform in late March of this year, but the number of user reviews is increasing at a rate faster than in any prior year on record. For the period of March 25 to November 1 of the last two years, app store ratings increased by 13.2% and 9.6% respectively. By comparison, ratings are up 39.4% this year for the same period. That huge downward line may look like a black mark on Netflix’s growth, but it’s climbing back up the ranks rapidly thanks to COVID-19.
The announcement of price increases came after Netflix filed less-than-stellar Q3 earnings in which they missed analyst predictions for new subscribers. Netflix has also seen the competition step up its game this year, with Peacock taking hit shows like Friends and The Office off of Netflix and with Disney+ showing Hamilton and hit Disney films on the service.
However, on the whole it’s been a landmark year for Netflix, which added a record number of new subscribers in the first two quarters (an increase so dramatic that Netflix blamed it for its Q3 miss), and although interest in streaming is decreasing slightly as the pandemic goes on, Netflix is still growing at an incredibly fast pace. and has hit on a winning strategy with its slow, small price increases. The $1/mo bump may be part of a long-term strategy rather than a reactionary decision in the face of disappointing earnings. Either way, it’s not enough to get people to cancel their subscription.
About the Data:
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