The Zhitong Finance app observed that following Netflix (NFLX.US)'s increase in basic and standard package prices in Australia last month, the company also took similar steps in Canada this month, increasing the prices of standard and premium packages. Prices have increased by between $1 and $2 in local currency. When analysts ask management if price changes are being prepared, management always flashes their words.
Greg Peters (Greg Peters), then chief product officer, said in April. “But in reality, at this point, we haven't even considered a price increase,” but Peters, who was promoted to chief operating officer in July, elaborated on the company's thoughts during the second quarter earnings call, but his remarks seemed to suggest that the price increase was actually feasible.
“Looking ahead, I'd say every country is in a different model. So we'll continue to evaluate a few different factors. We'll look at macro factors country by country. We also look very closely at our specific metrics, such as engagement and attrition rates.”
Netflix subscription prices in Australia and Canada rose soon after the above review was published, so Netflix's monitoring factors in these markets clearly showed that the company could justify the price increase by providing “more value” to users.
Is the US the next country to increase subscription prices?
Offsetting the anticipated slowdown
Investors don't understand what Peters refers to as “specific metrics,” such as engagement or customer attrition. Netflix keeps user engagement and ratings data strictly confidential, unless it wants to promote the success of a movie or TV series.
Netflix recently cancelled its 30-day free trial, which has always been one of its most powerful ways to get subscribers, sparking speculation that the move is a precursor to higher prices. Jeffrey analyst Alex Giaimo expects the streaming technology company to announce price increases in the near future, referring to Peters's remarks and the recent rebound in other markets. According to the analyst's estimates, every increase of 1 to 2 US dollars means that the company's revenue for fiscal year 2021 will increase by 500 million to 1 billion US dollars.
However, when talking about the discontinued free trial, a company spokesperson said, “We are looking for different marketing promotions in the US to attract new users and give them a great Netflix experience.”
In recent months, the company created a free content hub to attract new members and was licensed through CBS (CBS) ad-supported streaming service Pluto TV. Netflix rarely licenses its content to be distributed outside of its platform; the last time was in 2018, when it licensed “Bojack Horseman” (Bojack Horseman) to Comedy Central.
The health event pandemic brought forward its user growth to the first half of 2020 as people needed entertainment during home orders. As a result, Netflix acknowledged that growth in the second half of this year may slow, but a price increase of $1 to $2 could easily mitigate this slowdown.