Netflix (NASDAQ: NFLX) has increased the price of its services over the years. Until recently in 2016, his most popular plan costs $ 8 a month, but today, this plan today costs $ 11 a month. In the past, management has said it can justify further price increases if it proves increased value to its customers. Based on the continued growth of subscribers in the United States, Netflix seems to do just that.
However, the administration also said it would consider lower prices in some markets like India. CEO Reed Hastings has confirmed that the company is starting to experiment with a lower level of service under the current low-level plan ($ 8 a month), according to Bloomberg. This plan can only be offered to consumers in some countries or regions and will include fewer features than the lowest price plans currently available around the world.
What does a Netflix lower price look like?
It is important to note that Netflix is trying to maintain its services prices in all its markets. One reason for this is that Netflix offers customers access to its service world-wide, regardless of where a user is registered. So if you are traveling outside of your home country but still want to watch a Netflix, you can.
However, if Netflix had a lower price for its service in some countries, users could subscribe to the service in countries with lower prices and use them in their countries of origin. If enough people took wind energy from this "hack," it could have a serious negative impact on Netflix's revenue.
As a result, subscriptions to lower prices may work only in certain regions, as opposed to current designs. These low cost plans may also be limited in relation to the devices on which they operate. If a streaming device is not officially available on a market where Netflix offers a lower price program, this plan should not support streaming on this device. The company could also restrict available content to the lower priced program, thus providing a greater incentive for users to later upgrade their plan.
Note that Netflix did not give details of what might look like a lower rating plan. My comments above are just a few ideas that investors can expect the company to apply to reduce the negative impact of low-priced projects on average revenue per subscriber.
Netflix faces increased competition around the world by both start-ups and established media companies. Netflix is often one of the services with higher prices in the markets in which it operates, but it is not always worth its high price. As the company adds more content to its library on international markets, it could eventually prove its value to subscribers, but it is in danger of being overshadowed by competition if it does not currently offer a competitive price.
Why Netflix will continue to increase prices in the US and in the developed markets
While Netflix does not offer value in all markets, certainly in places like the United States. In addition, customers believe that Netflix content is still improving. A recent survey by Piper Jaffray revealed that 71% of US subscribers believed that the Netflix content library had improved over the past year.
Netflix invests heavily in the marketing of original content and pushes for nominations to pay more attention to its content library. The total marketing budget has increased by more than 50% this year.
As always, Netflix spends a ton on new content, with about $ 8 billion knocking out the results this year (and even more cash-based). Together with marketing efforts aimed at becoming familiar with the company's content, investments seem to be performing. The fruits of these investments are seen in the continued growth of subscribers, even if Netflix exceeds 57 million US households. For reference, this is more than 50% of US households with broadband internet access.
But to continue investing in content and marketing, Netflix will eventually have to re-raise its prices. Rising prices in developed markets (where Netflix deserves a premium) can help offset the lower average revenue in emerging markets. Based on improved customer feedback on the product in the US, Netflix will not have any problems that will raise prices by another or two more dollars.
Adam Levy has no place in any of the listed stocks. Motley Fool owns shares and recommends Netflix. Motley Fool has a revelation policy.