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This past week, Netflix revealed the plan for its next phase in taking over the world. Just kidding, but Netflix CEO Reed Hastings did reveal that the company will unveil higher-priced plans as it moves forward. In an investor meeting, Hastings said that the Netflix pricing changes will come on slowly, but are definitely coming.
We want to take it very slow. Over the next decade I think we’ll be able to add more content and have more value and then price that appropriately.
Netflix is coming off of a super strong quarter. The company now has more than 65 million subscriptions worldwide, and that number is growing every day. However, The Guardian reports that Netflix is still currently shelling out 4.6 times its actual net revenue acquiring content for users from other production companies. Obviously, Netflix is still a growing company, but eventually its investors are going to want to make money, and that’s where the subscription increases will come in. Yes, they’ll be coming over the next decade, but I wouldn’t be shocked to see the first price increase come sooner rather than later.
The company may get more aggressive in terms of password sharing, and also says they want to “motivate” people to sign on for High Definition versions of Netflix, as well as buy packages that allow subscribers to stream programming on more than one device at once. If more people sign up for these more lucrative versions of Netflix and if prices increase at the same time, the company could be eventually be rolling extra cash. We’ll have to wait and see what the impact will be on the average household, however.
Netflix has learned it’s a bad idea to make changes too quickly. This is the company that once split its straight-to-home DVD and subscription streaming services seemingly overnight, creating the now-defunct Qwikster to split the services and change the prices of the company’s product. Subscribers rebelled and chaos ensued, until just a few weeks later Hastings was forced to change his mind and shut down Qwikster. Obviously, Netflix doesn’t want that sort of debacle to prevail again, and so the company is doing this in a subtler manner: gently releasing the news, and also noting it will take up to a decade for the huge pricing changes to go into effect.
By that time, Netflix seems to be hoping that its library of purchased and original products will be strong enough that the average household won’t be able to live without the subscription streaming service and will willingly shell out the extra cash. Netflix has borrowed a lot of money and made a huge push to create its own proprietary shows and has done a good job at garnering interest over original shows as varied as Daredevil, Orange is the New Black, House of Cards and All Hail King Julien. Now, the question just remains if those programs will be enough to keep people invested, despite several major price increases over the next few years.