Netflix, Take an Inch But Don’t Take a Mile

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Netflix’s crackdown on password sharing was taking an inch. Increasing subscription prices so quickly after, and during a cost of living crisis, may lead to consumers thinking that the streaming giant is taking a mile. 

Earlier in the month Netflix announced that it would be raising its prices, following a previous increase in January 2022. The most basic plan will increase by £1 a month, and the premium subscription by £2 a month which is arguably a very small increase but actually equates to 14.3% and 12.5% respectively. So why the many complaints from avid viewers? 

This price increase comes directly after Netflix, amongst other services, started to crackdown on password sharing and multi-household accounts. The introduction of this crackdown received a lot of backlash, and Netflix braced themselves for some slow growth as users reluctantly bought their own subscriptions. 

However, the number of cancellations following this crackdown on password sharing was far lower than expected according to Netflix, and they have seen impressive growth in subscriber numbers since. In fact, Netflix reported an 8.8m increase in customers in the third quarter of 2023 – its strongest growth in years. Increasing the price, so soon after a very publicly disliked crackdown on password sharing which has led to your strongest growth in years is likely to leave a sour taste in many loyal and new subscribers' mouths.

Outside of improving its growth, why else is Netflix increasing the price of its subscriptions? The price increase does not impact its ad-supported tiers, suggesting that the streaming giant is trying to encourage new users and cost-conscious customers to switch to its ad-supported subscription. This is logical given that the revenue will likely be higher per-user from its ad-supported tier compared to its others. 

Of course, having more customers signing up for Netflix’s ad-supported tier does also come with a pretty clear risk of increased customer churn, especially when you consider that some of Netflix’s planned programming will have been heavily impacted by the writers strike meaning they can’t rely on releasing blockbuster content month-on-month. Instead, the next stand-out series like The Crown, or Sex Education could be many months down the line. 

Alongside this price increase, Netflix must ensure they’re delivering a product that is superior to all of its competitors - otherwise many will think the increase is unjustified. This superior product is not just about the content available on the platform. Consumers will also be scrutinising the user experience of the platform, ensuring that they can find the content they watch quickly whilst having relevant suggested content provided to them. A clunky player with very few features is detrimental to the whole viewing experience, and will turn subscribers away from a platform. Therefore ensuring your product delivers against CX is essential and this is further scrutinised as prices increase. 

The ability to stream on-the-go on a low-bandwidth connection is also increasing in importance for a significant proportion of subscribers using streaming services whilst commuting or travelling. Moreover, with Netflix continuing to expand into the gaming market, ensuring your technology partner can deliver the most efficient processing possible to low bandwidth devices keeps subscriber content and reduces churn. 

Subscribers will also be actively evaluating the live streaming events that the platform puts on. With our recent showing that 32% of consumers spend 5 or more hours watching live streamed content every week, only beaten by video-on-demand at 34%, the importance of live events cannot be understated. Unfortunately, Netflix does not have the most impressive live streaming record, with the finale of Love Is Blind experiencing multiple delays and issues. Moving forward, Netflix should look at scaling their live events, and delivering them effectively to maintain and grow their subscriber base. 

Delivering this enhanced consumer experience, whilst providing new live streaming events, is an effective way in which Netflix can justify and placate its customers on its price increase.

[Editor's note: This is a contributed article from Bitmovin. Streaming Media accepts vendor bylines based solely on their value to our readers.]

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