Earlier this month, Netflix raised prices in Canada, which has led many to speculate that price hikes are coming soon in the U.S. While the company wouldn’t come right out and say that a price increase is coming, it certainly sounds like with more originals on the horizon in 2021.
Netflix Co-CEO Ted Sarandos confirmed on their Q3 Investor Interview that they expect their full slate of content planned to in fact come out in 2021, with some appearing later in the year than originally expected.
But with that additional content, may come a higher price, which COO Greg Peters says is because of the additional value created for members.
Peters said there is “no magic algorithm” when it comes to price hikes, but the “the core model we have…is to take the money that our members give us…and invest that as judiciously as smartly as we can…and when we deliver more value to our members, we’ll occasionally go back and ask those members to pay a little bit more to keep that virtuous cycle of investment and value creation going.”
Peters said that the company evaluates price hikes at the country-level, so just because one country saw a price hike doesn’t necessarily mean another one would. Some factors include popular titles in that country, upcoming slate, engagement and churn in those markets. But ultimately Peters said that they want to remain an “want to remain an incredible value as we continue to improve the service and grow.”
But given that “the number of original productions that we’re doing is increasing…if we do that then we feel like there is that opportunity to occasionally go back to our members where we’ve delivered that that extra value in those countries to pay a little bit more.”
When asked about the removal of the free trial, Peters confirmed that they will be testing other marketing tactics, like making Netflix free for a weekend in a certain markets (similar to premium channels like HBO & Showtime on cable in the U.S.). They have plans to test this in India, then try in other markets.
Netlfix last raised its prices back in 2019, when its basic plan went from $8 to $9, it’s standard plan went from $11 to $13 and its premium plan went from $14 to $16. Despite the price hikes however, the streamer still attracted more users, with millions of subscribers signing up for the platform each quarter.
Jefferies analyst Brent Thill estimates that Netflix would be in the position to add $500 million to $1 billion in extra sales in 2021 by just raising prices $1-2 in its major markets, according to a report on Yahoo Finance.