When will Netflix monthly subscription be “Too High”?

I love Netflix (NFLX).  I honestly do not know where I would be during busy season without the streaming subscription service and even on lazy Saturday or Sunday mornings with the lady binge watching a show with a cup of coffee.  For us “cable cutters”, Netflix has been a wonderful supplement for our entertainment purposes.  Back in 2014, Netflix rose their prices on new customers from $7.99 to $9.99, but didn’t touch us grandfathered customers.  They didn’t touch us, until now.  Our price will go up 25% from $7.99 to $9.99 or a “small” $2 more per month or $24/year (excluding taxes).  Question is – when and at what price will Netflix be too much or too high?

netflix

Netflix Background

From Netflix (NFLX) company profile page, “Netflix is the world’s leading Internet television network with over 81 million members in over 190 countries enjoying more than 125 million hours of TV shows and movies per day, including original series, documentaries and feature films. Members can watch as much as they want, anytime, anywhere, on nearly any Internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments.”

How amazing is that?  Over 125M hours of TV?  First off, damn.. that is sad and I know I contribute to that total late at night instead of writing articles for all of us!  But 81 million members all over the world.  They are the United States well-recognized name when it comes to streaming services.  Amazon (AMZN) Prime service is underway, but they are no where near the streaming recognition as Netflix is.  I don’t know how many times I ask people about a show and they ask – “Is that on Netflix?” as if a tissue is Kleenex.  It comes with the streaming territory on this one.

They started in 1997 with the DVD rental service, as that was taking off, and then they were leading in the streaming service.  I could conclude that they are “ahead” or at least in the lead when it comes to the changing technology within the entertainment service department.  What else were they on the forefront of?  Made for “Netflix Original” series – Insert: House of Cards, Daredevil, etc.. the list goes on and these are blockbuster shows.  They are continually adding more subscribers now that they are going to a world-wide reach approach.  Very amazing, however, the question remains – where will the cost go? 

Netflix Price & Potential Price

For as many years as I’ve been a streaming member (could be 5+ years now)i Have paid a very very low fee of $7.99 + tax.  Having Netflix supplements and is support for the reason Why I Don’t have Cable and, funny enough, my recent battle and change of internet from AT&T (T) to WOW! internet service – allows streaming at a much, much faster rate (about 6x faster!).  I love it – Netflix at $7.99 and my internet at $24.99; total cost = $32.98.  Perfect.

Now, that price will be $9.99 going forward with Netflix, which obviously I could care less about – as $9.99 is still a great price for an amazing service, especially with the now Original shows and movies they are producing.  However, how many more 25% increases will we endure in the short and long term?  I started giving this more thought.

If my internet is $24.99 and my Netflix service is $9.99; I’m now paying a rounded $35.00.  Okay, perfect, low price and incredible service.  However, I know there are internet + cable bundles from $70-$90 out there, which is why I avoided them in the first place and I know it’s a reason why Bert is debating to cut the cord himself.  At one point, my internet and Netflix was a combined $45, which I feel is still just fine.  But how much is too much for me?

I believe it’s easy.  No matter what – I am going to have internet.  I am going to have to battle every 12 months to keep it at a very low rate, preferable under $35.  I would love to avoid the ceiling of $50 on a combined effort, as for $20, potentially, I could have sports and other channels such as HGTV, Food Network, CBS included.

Therefore, at my current price of $25 for internet, that leaves a $25 ceiling on Netflix.  However… if the internet jumps to $35 and I can’t win that battle, then my maximum for Netflix would be $15, but how long until then?  If they jumped $2 easily, couldn’t they do it again or even a $5 increase to round it off to $15 for 2017?  Do I need to start heavily monitoring Netflix?  Would they change their customer access levels?  Also – could there be a disruption with cable companies with their trend of going towards more subscription and streaming based services that could cause Netflix to either increase prices, competitively try to maintain contracts of some sort and leaving the customer to bite the bullet?  It’s interesting, when thinking of what could happen…

Conclusion and inquiries on Netflix

I don’t foresee another price hike for customers in 2016, given us legacy customers are feeling one and would be very difficult from management’s perspective to double hit us in one year.  That, however, doesn’t rule out price increases going forward in my mind.  If it jumps $5 to $15/month, that’s a 50% increase.  Think there is potential there?  I have many questions for the readers – what is your maximum price for Netflix?  Do you foresee another price jump here?  If so – when?  If not – why?  Do you see anything else tempting in the streaming space, such as the Sling box?  I would love to see the debate, thoughts and insights on this one, as I think it’s interesting and something that rarely, if ever, gets talked about.  Please leave comments and questions below!  Appreciate everyone for stopping by and happy streaming!

-Lanny

Facebooktwitterredditpinterestlinkedinmail

19 thoughts on “When will Netflix monthly subscription be “Too High”?

  1. Streaming is the future of television. It seems like everyone is jumping on board, even the big networks are heading this way. CBS launched their version called All Access last year. Right now, it’s just access to all CBS shows, but in the near future it will offer shows that can only be seen on All Access. Sony also jumped in recently with a UI that goes through PlayStation. I assume Xbox is not far behind.

    With all the services out there, I see price drops in the future.

    • IH,

      I couldn’t agree more that streaming is the future. If we see price drops – I’ll be coming back to this post and patting a few of you on the back – would love nothing more than some knockout rounds with cable companies/their networks vs. Netflix to see the outcome. Have a great Sunday and thanks for coming by IH!

      -Lanny

  2. Sling is a waste of time. I have only heard terrible things about there service. I tried their free 7 day trial and it was down for the entire time… talk about great service. I do not think Netflix can increase their price much further, which is great for us users! It is no longer Netflix vs 3 or 4 other competitors. Many networks are entering the space which should theoretically drop the monthly prices. Maybe Netflix can offer a yearly subscription for a cheaper price? I know I would go for it.

    • Stefan,

      Good comments about Sling – appreciate the heads up on that.

      Would LOVE some competition/more fierce competition in this category if it means competitive pricing. If Netflix had a $100 yearly subscription price – I’d dole out for that, no doubt. Appreciate the comment as always Stefan.

      -Lanny

  3. I don’t think they are anywhere near too high. They could always break it out like cable TV does and charge extra for Netflix originals. In fact, they are doing more Netflix Originals to increase and hold viewers. If you saw Doctor Who on TV, you could pay Netflix to watch it again, but you can’t watch shows like DareDevil anywhere else. With the success of House of Cards and the Marvel shows, Netflix is on a role.

    Personally, I can see Netflix going as high as cable companies now paying $50 -$60 and people would still line up. Come on, no commercials and ON DEMAND. That is a gorgeous thing.

    PS. Watching Mad Men on Netflix as I type this….

    • Wallet Squirrel,

      Nice and thanks for the post – I agree – I love watching their Netflix originals (and congrats and pumped you’re watching Mad Men, great show). So they have a few great shows, no commercials (for now) and can binge on seasons. Not sure if I’d pay $50, though, as I’m more of a sports guy as well and would more than likely switch if it was at that point. Now, I think we are a LONG ways from $50, but think we aren’t too far from seeing the $15-20 for the service. I’d be curious to see if they do/would split out different packages. Great comment!

      -Lanny

  4. I don’t think we’re far from the day where the model will be like electric utilities have. VZ and T being regulated wholesale operators (absorbing TMUS and S). The wholesale side could include non-streamers. Cable companies would be hybrid operators and NFLX and AMZN would resell connectivity, bandwith and content. Canada might be a little different since BCE does content. Regardless, I suspect NFLX will keep their rates low until they have to create competitive bundles of their own.

    • Charlie,

      I agree – I hope they really start fist fighting here over viewers and subscribers. I do have amazon prime for the shipping and having their video streaming service is a nice bonus. I would welcome the competition. But regardless, one increase for now, and I don’t expect any others for a little bit of time, eh?

      -Lanny

  5. I got the same notice and considered suspending service. I have not been watching anything lately. I’ve been so focused elsewhere. This year I already dropped Hulu and Spotify. Netflix will likely follow suit, unless I get a lot more free time that begs for entertainment.

  6. Hi Lanny,
    A small $2 increase in dollars but that’s still a 25% price increase – quite a bit more than the average dividend increase!

    It’s interesting to me that “increased cost of doing business” seems to ignore the currently low inflation numbers around. My home security service also sent their yearly email “we’ve tried to keep costs low and we’ve even redecorated our service center to provide you faster service but unfortunately we have to increase the fees another 8% this year.”

    Best wishes,
    -DL

    • DivLife,

      Agreed – huge % increases for a small $. WOW… security is pumping the cost of “our party was kick ass this year, so here is your yearly increase, we’ll still do what we said we’ll do service wise, well.. uhm.. maybe” That’s awful… agh, Screw these increases, and lets fight!

      -Lanny

  7. Netflix is trading at 350 times earnings, so the market certainly expects price increases. As a big sports fan, I wouldn’t see any streaming service as a substitute for cable or satellite TV.

    • Brian – too funny. I agree, one way to look at it – if the price is trading at an absurd multiple, then I’m sure it’s build in. However – they also are grabbing more vieworship via international markets, so I am sure that is playing well into it also.

      -Lanny

  8. I think I’ll have to consider each price increase as they come, but for now a $2 increase is nothing considering having netflix allows me to cut virtually every other entertainment expense out. Don’t need cable, other streaming services, or even to rent movies.

    • MrSLM,

      Thanks for the post. I agree, I’m perfectly fine with a $2 increase. I’d be okay with a $15 subscription (don’t tell Netflix though!). However, something to keep a close eye if that starts to creep up even higher. I hope competition keeps it status quo for a time period, though. Ah… the future.

      -Lanny

      • Yeah I’m not sure where the “it’s too much now” point is, considering just how many services it replaces for me. But right now it’s still firmly in the “meh who cares” bucket, so I’ll happily punt this decision down the road.

  9. For what you can watch, Netflix is a very cheap offer, so you’re lucky you stayed at the old price for so long!

    I think Netflix is clever by starting at such a low price. It entices people to join, and vastly undercuts the competition. Yet their business operations can grow and grow with only server upgrades being the problem. Plus, tiny increases are huge % changes – great on their bottom line. I reckon you will see more increases over time, even if it’s just $1 at a time.

    If you don’t like it, then don’t pay it (and/or buy some of their shares). 🙂

    Tristan

    • Tristan,

      Couldn’t agree more. Great service, great shows, still a lost cost of means for entertainment. The small changes are HUGE to their bottom line, shareholders have to LOVE small price increases, as most individuals won’t even shake at the $1 or $2 additional charges. I think once the bill gets to over $20 or $25, then it’ll be noticed, however!

      -Lanny

Leave a Reply

Your email address will not be published. Required fields are marked *