Netflix increases subscribers and raises subscription charges for US users
Subscribers Up! Investment Up! Prices Up!
Netflix posts some impressive subscription numbers and raises subscription charges for its US customers. Does this mean increases are coming for the rest of us?It looks initially like subscribers in the streaming giant’s biggest market, the US, might soon be footing the bill for the recent round of increased content output that has seen the popularity of the service pull in record numbers of subscribers around the globe.
Netflix pulled in 8.8 million new subscribers in the last 3 months of 2018 but faces strong competition from other streaming services and the full impact from Disney+, and the subsequent loss of their film and TV catalogue, has yet to be fully realised.
In an attempt to gain the upper hand, strong investment in original programming has resulted in successes for the company with the likes of Bird Box being seen in at least 80 million households in its first four weeks.
But the company's production ambitions run greater than just shoving an all-you-can-eat-buffet in front of customers, they have an eye on quality as well as quantity and, in a rare move, Netflix recently showed critically lauded black-and-white film Roma, an original picture, in theatres for several weeks before making it available online.
On the back of this strategy total subscriptions have increased 26% to a shade under 140 million. However, this approach is not without a downside and that would be the estimated $8 billion it cost to put this original content together in 2018, more than either Amazon or Hulu. Netflix remains committed though, to the extent it took an additional $2 billion worth of debt to part fund its plans. Expenditure in 2019 is expected to top $13 billion, according to venture capital firm Loup Ventures.
What of the competition? Netflix Chief Executive, Reed Hastings, estimates that about 1 billion hours of television is consumed each day in the U.S. and Netflix accounts for about 10% of that. That enormous consumption allows the players to “compete so broadly…..that any one provider entering only makes a difference on the margin.” The company said it faces more screen time competition from online video game Fortnite than it does HBO, and said it can differentiate itself through its content.
The knock-on effect of all this market pressure is the squeezing of traditional broadcasters, possibly to the point of suffocation. In the UK, traditional television viewing is falling faster than in any other European nation.
Despite some proven flagship Saturday-niters and occasional reality TV hit, among under-35s the average time per day watching traditional television in the UK is down 43% compared with a peak in 2012 - the year Netflix made its debut in Britain - and a generation of young people appear unlikely to ever pick up the traditional broadcast viewing habits of their predecessors.
It is this challenging environment that is seeing terrestrial broadcasters making additional plans for their own online/subscription services (for example BBC’s plans for iPlayer) in an effort to stay relevant.
Netflix intends to add another 9 million subscribers in the first quarter of 2019 and clearly doesn’t feel that increased charges (in those countries billed in dollars only, for now) will be an impediment to that intention.
The company said its most popular plan will be increasing to $12.99 a month, up from $10.99, with both the lower and premium bands adding $1-2, which could cause some customers to ditch the service for cheaper alternatives. However, all the other streaming platforms face similar market conditions and price hikes are likely to be a consideration for them too. In context, it's the largest hike since Netflix launched its video streaming service 12 years ago, according to The Associated Press.
Anyone new to Netflix’s streaming service will immediately be charged the higher prices, while the increases will roll out to existing customers over the next few months. Netflix will notify existing members by email 30 days before raising the cost of their subscription.
Are you being affected by these new charges? If so, will it affect your loyalty to Netflix? What about European subscribers yet to be affected? Are you thinking of finding a cheaper service before prices experience an increase?
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