The latest price increase from Netflix has come into effect. For those who are curious, the basic service has remained the same, but the standard service and the premium service have seen raises of $1 and $2 from $9.99 and $11.99 to $10.99 and $13.99. These price increases are mild compared to the time when Netflix raised prices by as much as 60 percent by no longer bundling its streaming service with its DVD by mail service in 2011, but since they are what they are, they have nonetheless provoked quite a reaction from its subscribers.
How Have People Responded to the Raise in Netflix’s Prices
Netflix subscribers have reacted to the price increases in much the same manner that most people would have expected them to, which is to say, they have been less than pleased. After all, no one likes to pay more for the same thing, which isn’t helped by the perception on the part of some subscribers that they are actually getting less because of some of the content that has been removed from the streaming service in recent times. With that said, some people have complained about the price increase but stopped there, whereas others have taken a further step by cancelling their subscriptions, which can be seen in how Netflix has suffered a slower rate of growth in its number of subscribers whenever it raises its prices.
None of this should be considered surprising. After all, the market for a particular product or service consists of people who are willing to pay different prices for the same thing. Whenever a price is increased, that will make the product or service too expensive for some of the customers, meaning that they will either seek out a cheaper alternative or stop making use of it altogether. However, this does not necessarily mean that the business will suffer, seeing as how the loss of those customers can be more than made up by the additional revenue collected from those who have chosen to stay depending on the exact details of what has happened.
Why Is Netflix Raising Prices?
Netflix has been raising its prices for the simple reason that it needs that revenue. The streaming service has been spending enormous sums of money for the new content that it needs to bring in new subscribers and retain current subscribers, which has become particularly important because a number of media companies have decided to start their own streaming services. For some time, Netflix has been funding this process by borrowing, but while it retains plenty of credit because of its position in its chosen market, there is still a serious limit to how much it can borrow without hurting its financial position.
As a result, it needed to raise its prices to become profitable, which comes with an extra benefit in that it will prove it to possess true lasting power. Summed up, while the price increases upset the subscribers, Netflix had to make the choice at some point because of its changing priorities from building up a commanding position in the market to making that commanding position sustainable in the long run.
Follow Us
