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Analyst: Netflix Pricing Increase to Impact New Subscriptions More Than Churn
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The planned pricing increase that Netflix announced Oct. 5 for most subscription tiers will likely have a much larger effect on how many new subscribers it attracts than the number of existing subscribers who may drop the service, according to Wedbush Securities analyst Michael Pachter.
The rate hike will have a “minimal” impact on churn, he predicted, guessing it will result in “probably 1-2% attrition.” But he projected the pricing move will have “far more of an impact on new subscribers” because, at $11, Netflix will be “priced higher” than streaming service rivals Hulu ($10) or Amazon ($99 a year).
“From time to time, Netflix plans and pricing are adjusted as we add more exclusive TV shows and movies, introduce new product features and improve the overall Netflix experience to help members find something great to watch even faster,” Netflix said in a prepared statement.
As part of the latest pricing change, Netflix said it will increase prices for new U.S. members immediately and “will begin notifying existing” U.S. members of the price increase Oct. 19.
Before the new pricing changes, Netflix subscription plans cost $7.99, $9.99 and $11.99. The new prices are $7.99, $10.99 and $13.99, meaning that Netflix decided to keep the entry-level “Basic” plan the same. The $7.99 plan has remained that price since it launched in the U.S. in 2010, Netflix noted.
Starting Oct. 19, members “will be notified at least 30 days in advance, based on billing cycle, on when they will see the price change,” Netflix said, adding: “Members will be notified with an email and also see a notification within the service. The price change will roll out to members over the course of the next several months. As always, members can view pricing information within their account settings.”
In announcing the new price hike, Netflix noted that it last changed prices in the U.S. in October 2015. That earlier pricing hike led to thousands of subscribers dropping the service.
Since Netflix’s last price increase, the company “added a downloading feature, introduced interactive content, announced a robust slate of new content (including films) and have continued to improve the member experience,” it said.
