July 5, 2018
NEWS ANALYSIS — When it comes to subscription pricing, Netflix walks a historical tightrope justifying prolific content spend ($8 billion in 2018) with consumer backlash against any perceived erosion of loss-leader pricing.
Thus, Netflix has begun testing €16.99($19.85) and €19.99($23.36) monthly options to select consumers that afford access to content in 4K, HDR resolution and four Ultra HD simultaneous streams (screens) per subscription. The current base subscription costs €7.99 ($9.34).
In the United States, Netflix last hiked pricing in 2017 when it upped the standard tier $1 to $9.99 enabling subscribers access to two screens at once. The premium tier increased $2 to $13.99 enabling 4K UHD content streaming and four simultaneous screens.
In Europe, the premium tier plan drops from four screens to two.
Netflix, in a statement, said it continually tests “new things” in different markets over varying lengths of time.
“In this case, we are testing slightly different price points and features to better understand how consumers value Netflix,” said the company.
A spokesperson confirmed Netflix is not testing “ultra” pricing in the United States.
Of course, Netflix has an infamous relationship with subscription pricing. Seven years ago this month, co-founder/CEO Reed Hastings announced the SVOD pioneer was increasing by 60% the price of a popular streaming/DVD-by-mail combo plan – in addition to spinning off the packaged media service under the hastily assembled Qwikster brand name.
The PR fallout was immense: More than 800,000 subs dropped service within hours of the announcement. Even worse, Netflix’s stock plummeted nearly 80% — taking Hastings’ reputation with it.
“Whatever happened to Fortune’s Businessperson of the Year?” Wedbush Securities’ Michael Pachter, a long-time Netflix bear, wrote in a note at the time. “Whatever happened to the guy who was invited to the boards at Facebook and Microsoft? What happened to that guy? Do you think Facebook would have invited him to their board now?”
Months later Netflix abandoned the Qwikster concept, while Hastings and other executives made the rounds on fiscal calls and investor events asking for forgiveness.
Ironically, it was new communications hire Jonathan Friedland who reportedly argued against the price hike – arguing it would hurt the average subscriber. The same Friedland who was fired last month for alleged repeated racist comments in the workplace.