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Netflix (NASDAQ: NFLX) has increased the price of its service over the years. As recently as 2016, its most popular cost plan $ 8 per month, but today, that plan now costs $ 11 per month. In the past, it has grown to value its customers. Based on its continued subscriber growth in the United States, Netflix seems to be doing just that.
However, management also mentioned that it would be considered India. Reed Hastings CEO confirmed that the company is starting to experience a lower-tier plan ($ 8 per month), as reported by Bloomberg. This plan may be offered exclusively to consumers in certain countries or regions and will include fewer features than the lowest-priced plans currently available around the world.
Source Image: Netflix.
What does a lower-priced Netflix look like?
It's important to note that Netflix tries to keep its prices across all of its markets. One reason for doing so is that the customer has access to its service globally, regardless of where to use signed up. If you're traveling outside your home country but still want to watch some Netflix, you can.
However, if Netflix has a lower price for its service in some countries, users could sign up for the service in the lower-priced countries and use it in their home countries. If enough people got wind of that "hack," it could have a serious negative impact on Netflix's revenue.
As a result, lower-priced subscriptions might only work in certain regions, unlike its current plans. These low-priced plans may also be limited with regard to which devices they work on. Netflix offers a lower-priced plan, which plan should not support streaming on that device. The company could also limit the content of the plan, providing a greater incentive for users to upgrade their plan later.
Note that Netflix did not provide any details of what a lower-tiered might look like plan. My musings are only a few ideas that can be expected to reduce the impact of low-cost plans on average revenue per subscriber.
Netflix is facing up all over the world. Netflix is one of the most popular premium-priced services in the markets in which it operates, but it does not always deserve its premium price. As the company adds to its content in its international markets, it could eventually prove its worth to subscribers, but it risks being overshadowed by competition if it does not offer a competitive price today.
Why Netflix will keep raising prices in the U.S. and developed markets
While Netflix does not provide a premium value in all markets, it certainly does not exist in places like the United States. What's more, customers believe that the content on Netflix is still improving. A recent survey from Piper Jaffray revealed that 71% of U.S. subscribers believed that the Netflix content library improved over the past year.
Netflix is investing heavily in marketing its original content and pushing for awards. It's more than 50% this year.
As always, Netflix is spending $ 8 billion hitting the income statement this year (and even more on a cash basis). Combined with marketing efforts designed to get people familiar with the company's content, the investments seem to be paying off. Netflix outperforms 57 million U.S. households. For reference, that's more than 50% of U.S. households with broadband internet access.
To continue investing in content and marketing, however, Netflix will eventually be put to rest its prices again. Raising prices in developed markets (where Netflix reserves a premium price) can help offset lower middle income in emerging markets. Based on the customers' view of the product in the U.S., Netflix will again.
Adam Levy has no position in any of the stocks mentioned. The Motley Fool owns shares of Netflix. The Motley Fool has a disclosure policy.
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