Ars Technica:
Another round of Netflix price hikes is upon us. According to a report from The Wall Street Journal, Netflix will increase the prices of all of its subscription plans, effective immediately, for all new customers. Existing customers will see their rates increase over the next three months.
Netflix’s most popular plan, which lets users stream HD content on two screens simultaneously, will now cost $13 per month. That’s an 18-percent increase from its previous $11 monthly price. Netflix’s premium plan, which includes HD and UHD streaming on up to four screens simultaneously, will now cost $16, up from $14 monthly. The most affordable Netflix option, the “basic” plan, increases by $1, from $8 per month to $9.
Netflix last increased its prices at the end of 2017, but only its standard and premium plans were affected. This time around, all three plans will cost more, resulting in a price hike that affects all US Netflix users.
It will likely eventually affect customers in other countries as well. We are a Netflix family but, at what point will these increases stop us from paying for the service?
interesting that Netflix does a price increase right before Apple unveils their new streaming service… . That Apple service must be coming soon, right?
I’ll be looking at our home usage of Netflix and consider our options.
That’s not how purchasing decisions work. Everyone has their own conception of how much Netflix service is worth to them and will subscribe if the price is lower and unsubscribe if the price is higher.
If Netflix is worth $12 per month to me, then I will subscribe at $11 and unsubscribe at $13. There’s nothing unreasonable about that.
Netflix’s hope is that it’s huge investment in original content will have increased subscribers’ willingness to pay such that few will cancel service due to the price increase. We’ll see.
Netflix is still the strongest service in my mind. So if my subscriptions get too expensive, I’ll start killing the weak ones off before I gripe about the good one that’s too expensive. DirectTV Now I’m looking at you.
PS: I say all of the above as someone who cancelled Sling last night (I don’t have cable aside from the internet portion). Why? Because I use Sling mostly for live sports and for me that’s the NFL and college football. I don’t care about basketball and get baseball via MLB.
But… I didn’t cancel Sling because it saved me $2 or even $5. The package I had was $40. So, yes, people will cancel for monetary reasons and I can see someone being reminded that they don’t really ever watch Netflix by this and thus cancelling it to save the $13. I just don’t see anyone being so $$ sensitive that they’d keep it at $11 but torch it at $13 *because of the $2 difference*.
FWIW, I actually cancelled CraveTV over a $2 increase. But I wasn’t very happy with it to begin with, of course. 🙂
Assuming you use it regularly… come on. “But its 18% more!!!” Yeah. $2. TWO. DOLLARS. If you buy a black coffee out once a month you spend that and likely more.
Bottom line… if the $13, never mind the $2, is material to your budget you’re doing something wrong.
PS: Contending that $2 is a lot when to use Netflix you need a high speed internet plan that, at least in the US, likely costs $50+ also does not compute.
Right. As I said above, sometimes these things make one realize that you don’t like or aren’t really using a service and so it’s a spur to take action.
Of course it’s your decision. But it is still unreasonable to argue that small price differences cause cancellations because of the amount
The $1 can’t possibly be material to you or anyone else paying for high speed cable etc. Sure, you can argue it is, but in reality? I don’t believe that for a second. Virtually no one budgets that closely and if you’re so poor that you need to, you likely aren’t a) paying for Netflix in the first place and b) likely don’t have high speed internet either.
No one who unsubscribes is doing this from a rational, finance-based foundation. People simply don’t say “Yes, I have done a detailed cost/benefit analysis and my ideal max price point is $11.23.” That’s just not how consumer psychology works.
Instead, what this will spur is an emotion based decision along the lines of “Screw that, I’m not paying one cent more!” while in some other cases this will cause people to think “You know, I’ve not used Netflix at all for a while. I might as well cancel it”, i.e. this serves as a reminder that they were wasting $11 in the first place and since it’s top of mind now, hey, let’s save some money.
maybe if they stopped licensing so much crap TV, they wouldn’t need to keep raising prices.
If people can be concerned or complain about the price of milk or gas, I see no reason why we can’t for digital media.
Pricing is relative. Two price-hikes in 3 or 4 months, of 30%, is a noteworthy. Netflix used’ to be 10 bucks a month. Now it’s $13.
Perhaps but I put a value on things. If the thing isn’t worth that value, whether it’s $2 or $2,000, I won’t pay it.
But in all of those cases you’re not really leaving because of the $2. You’re being reminded that you have Netflix and spurred to think about how much you use it. If you use it regularly, especially for Netflix exclusive content, the $2 is immaterial and I flat out do not believe people who rage over that amount of money.
If you don’t use it or you think about it and realize that everything you view on Netflix you can also get on Prime, then yeah, you might move to Prime. But AGAIN, the price increase is just a spur to think about how you’re using the service.
What I’m objecting to is the idea that someone is relatively satisfied with Netflix and all of a sudden is outraged that it’s now $2 more expensive and cancels it. Or that they budget so tightly that the $2 breaks their budget.
Wow. $3!!! No, sorry, see my other posts for why I think its ridiculous to assert that anyone is outraged over $2-3 and will cancel a service that they use because of that.
Rumors aside, I’m not sure we’re ever getting a separate streaming service. We’ve already got Apple Music; could all the video streaming stuff just be bonuses for that?
I don’t know what you find so hard to believe. If someone values their Netflix service at $13 per month, then this price increase means they go from having a consumer surplus of $2 per month to $0. That’s the difference between being very satisfied and being on the verge of cancelling. Whether outrage is a reasonable emotional response or not, the idea that they are less happy with the service at the higher price is totally sensible.
Are you suggesting that if Netflix increased their price by 18% every single year that it would never be reasonable for a consumer to decide that they are less happy with the service at the requested price or to cancel?
Used to be $10? I swear I used it at $7.99.
What you’re missing is that Netflix doesn’t exist in a vacuum. There are competitors, substitutes, and alternative ways to spend ones money and time. You’re correct that no one could reasonably think “$11 is totally cool but I can’t afford $13”. Rather, at $13 one might reasonably decide that Amazon Prime at $10 per month with a smaller content selection but also free shipping is preferable to subscribing to Netflix. Or maybe your friend has been telling you about some great HBO show and you were considering switching from Netflix to HBO and two extra dollars a month is the clincher for a decision that you were on the verge of making anyway.
You’re correct that humans are not perfect rational economic actors. But people comparison shop, clip coupons, look at unit prices in grocery stores, buy cheaper store brands, and in all sorts of other ways try to find small savings here and there.
Due to the set-and-forget nature of subscriptions, you are no doubt correct that there are many people for whom even $11 wasn’t worth it and that the price increase is merely the trigger for re-evaluation. But the actual difference between $11 and $13 matters at the margin.
We are a Netflix family but, at what point will these increases stop us from paying for the service?
When you think $N/mo. isn’t worth it for unlimited streaming of all their content?
I’d assume it’s nowhere near that point if you actually use the service.
Netflix wasn’t $10/mo. in September of 2018 – they raised the “standard plan” to $10.99 in October … of 2017.
(The one-screen plan is now a whopping $9/mo, too!)
I don’t think Netflix really cares about Apple’s streaming service when doing their regular price increases.
Pretty sure Netflix licenses things based on what research tells them people will watch and thus pay for.
Your tastes (or mine) not liking the content makes no difference at all.
(Some of it is probably also packaging from the content owners; Netflix probably can’t ala carte all content either.)
Problem with the incessant use of that coffee analogy is that it is used every time with every increase of a dollar or two for every service. By now that coffee is up to 40 bucks.
Yeah. Sorry. I wasn’t really intended to argue with you, sorry if it came off that way.
The interesting part is that for some services, like CraveTV, I suspect they end up with less revenue after a rate hike. I think there were a lot of people just barely tolerating them: they don’t have that much content, their navigation is awful, and they come across as sleaze with every document they write.
Netflix can probably pull it off.
NO ONE does that. ZERO people budget like that – “Oh I have a consumer surplus of $2 and now it’s gone!” is fiction. If someone is poor enough to watch every $2 they aren’t paying $50+ for high speed internet and another $11 for Netflix as it is.
Netflix is in over 50% of US households. They’re the first streaming service most people add on with things like Prime, Hulu, Starz, etc coming after.
I can see some people thinking “yeah, I really haven’t watch TV and esp Netflix in a long time, might as well cancel” and I’m sure there are some people who will pitch a fit and cancel because they would object to the very idea of paying more no matter what it was. But the argument that the $2 is somehow budget breaking for anyone paying for internet + current Netflix is ludicrous.
And you’re not going to cancel *because you can’t afford or don’t want top spend $2 more*. Come on, no one calculates value so finely that they say “Well, yes, according to this spreadsheet, it’s worth $11 but not $13.” How the hell would you even do that? $ per minute watched? Again… Come on.
I guess in your world no one has ever looked at two brands of toothpaste side by side in a store and chosen the cheaper one.
Not even comparable. Someone doing that is trying to control their grocery spending and they’re not going to do that just in the toothpaste aisle, they’ll do it overall. Complaining about $2 when you’re already spending for high speed internet and $11 for Netflix would be like someone worrying about 25 cents on toothpaste when they have some pricey steaks (high speed internet) and a bottle of wine ($11 Netflix), in the cart. That would be ridiculous too.
Even if someone does that it would be such a tiny percentage of the user base as to be irrelevant. And no, this isn’t me conceding the point.
I get the argument that consumer choice is not perfectly rational and that price competition is not perfectly efficient. But to argue that no consumer decision about subscribing to Netflix is influenced by a price increase is pretty extreme. In economics terms, you’re arguing that the demand for Netflix is perfectly inelastic with respect to price increases that are small in absolute terms. So I’ll ask the obvious question that I already asked:
Are you suggesting that if Netflix increased their price by $2 every single year that it would never be reasonable for a consumer to decide that they are less happy with the service at the requested price or to cancel?