Analyst: Netflix Price Hike to Negatively Affect Sub Growth

Following Netflix’s announcement that it was raising subscription prices, the company’s stock increased in value as Wall Street applauded the service’s first price hike since 2017.

Wedbush Securities’ digital media analyst Michael Pachter has a different perspective. The long-time Netflix bear contends the price hike will negatively impact the SVOD pioneer’s mature domestic subscriber base of around 60 million.

Pachter argues that Netflix has saturated households above the medium income. Any new subs will come from households below the medium income – and likely more price sensitive.

“The latest price increase may slow domestic subscriber growth dramatically this year,” Pachter wrote in a Jan. 16 note. “We do not expect significant churn given the utility provided by the service to existing subscribers but attracting new subscribers will likely be more challenging because of the higher prices.”

The analyst says the price hike will have the biggest impact on Netflix’s $12.99 standard plan affording subscribers to two HD video streams. By comparison, Amazon Prime Video costs $10 monthly when paid annually; and Hulu costs $11.99 for ad-free service.

Regardless, Wedbush contends the additional monthly revenue will never see the bottom line.

“We do not expect a meaningful impact on profitability from the pricing increases, with the extra cash likely used to fund Netflix’s ballooning content budget,” wrote Pachter.

Netflix reports Q4 results at the close of the market on Jan. 17.

 

 

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