Will $1 Price Increase Hurt Netflix?

Media

Published: October 9, 2015 6:36 am

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The price for the streaming service provided by Netflix Inc. (NASDAQ: NFLX) rises by $1 a month on November 9. It applies after some people take advantage of free promotions. Wall Street liked the move and pushed the stock higher by 6%. If the plan causes customer count erosion, the shares won’t be so buoyant.

The $1 price may not seem much. Under the new Netflix “standard” plan, which will have a new price of $9.99, the user gets two things that the $7.99 “basic” plan does not give. The standard plan has HD and can be viewed on two screens at once. The basic plan subscriber can only use one screen. Some people will opt for the $7.99, but it will take several quarters for the results to be posted, if they ever are at all.

While $1 appears to be less than a modest amount, competitors like Amazon.com Inc. (NASDAQ: AMZN) measure their subscriber rates in small numbers of dollars. Amazon Prime is priced at $99 a year, a good deal compared to the $9.99 a month price from Netflix. Prime offers free two-day shipping on many products available from Amazon and a photo and music hosting plan. Whether that is more attractive than the Netflix deal in the eyes of consumers is impossible to tell.

Apple Inc. (NASDAQ: AAPL) has a different model. The basic Apple TV hardware costs as little as $69. Beyond that, people can rent or buy movies and games, as well as store games and photos. The product has a Siri version for people who want to talk to their TVs.

These three services sit among a sea of others offered by satellite TV, cable and fiber-based products from some of the largest distributors of content in the world. Some are bundled with broadband and phone service. Some allow storage of content. The options among the services are so plentiful that the typical consumer almost certainly cannot figure them out. Netflix may benefit from the confusion. Some of its customers won’t want to wade into the chaos.

Confusion reigns. Netflix just made it worse.

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