Analysts: Netflix Eyeing Flat Q3 Sub Growth, Near-Term Price Hike

In the rollercoaster COVID-19 era, few media companies have shined as brightly as Netflix. The SVOD pioneer has defied odds and naysayers, adding more subscribers (26 million) in the first six months of the year than it did in all of 2019. It ended June with 193 million subs worldwide.

As the third quarter closes on Sept. 30, the SVOD pioneer is facing challenges, not the least of which is a probable near-term subscription price hike. Netflix hasn’t raised its domestic fee since May 2019 when the most-popular plan increased $2 to $13 monthly.

“After a change in language regarding pricing on the [Q2] call, we believe a potential hike is probable in the near to midterm,” Alex Giaimo, analyst at Jeffries, wrote in a note. “In Q1, Netflix said that they were ‘not even thinking about price increases,’ while the Q2 language was more open-ended.”

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Jeffries contends price hikes from $1 to $2 monthly in North America and Europe could see Netflix add near $1 billion in fiscal 2021 revenue. A similar price hike in Europe, the Middle East and Africa (EMEA) could add $700 million.

“We have confidence that Netflix can raise prices in international markets, given its deepening content library and outsized consumer value proposition,” Giaimo wrote.

On the domestic front, Netflix is facing blowback from politicians and public action committees regarding a small French movie, Cuties, critics say exploits young girls. The streamer also received a letter from GOP senators questioning its motives behind greenlighting an original series based on a book by a Chinese author accused of being pro-Beijing government and anti-ethnic Uyghur Muslims. Both situations have seen increased calls on social media to cancel Netflix subscriptions.

Wells Fargo analysts contend Netflix will add 2.5 million subs globally in Q3 — down from a previously projected 5 million due to increases in subscriber churn. The culprit: a fivefold churn increase to 4.7% in one-week subscriber defections due to Cuties. The analysts said that could result in a sub loss of 28 million. Netflix is projecting a global sub gain of 2.5 million.

Meanwhile, Michael Pachter, media analyst with Wedbush Securities in Los Angeles, said he would surprised if the Cuties controversy extended beyond the United States. The analyst said that with one-third of households considering themselves religious, it’s possible Netflix saw a spike of 1% to 2% over its normal churn.

“Combine that with the pull-forward of new subscribers from shelter-in-place. and they could deliver disappointing domestic subscriber growth,” Pachter said in an email.

The analyst said he would be “shocked” if Netflix raised prices in the face of new competitors such as Disney+, Peacock, Apple TV+ and HBO Max.

“They had no competition before and now they have [competition] priced lower, Amazon content is getting better, and HBO Max will someday figure out how to get their product on Roku-powered TVs,” Pachter said.

“Yes, I think that they can raise the price and that the brand is super strong, but the cult [Netflix bulls] values them at ridiculous levels because the cult believes in unfettered growth, and any shift in that narrative will disappoint them,” he said. “I still don’t expect a price hike.”

Netflix reports third-quarter results Oct. 20.

Reports: Netflix Subs Don’t Want More Price Hikes, Open to Ad-Supported Streaming

With Netflix set to release financial results on July 17, two new research reports suggest the SVOD behemoth’s subscribers would consider ad-supported content instead of paying higher monthly fees.

While Netflix doesn’t stream advertising and has made no suggestion it plans to, industry scuttlebutt contends the No. 1 SVOD service might have to consider the option to offset burgeoning content costs and debt.

Recent comments from NBC Universal and Hulu executives have rekindled speculation as to whether Netflix will introduce an ad-based tier. Hulu has always offered a less-expensive ad-supported option, while NBC Universal’s pending streaming service will be both ad-supported and subscription based.

According to new TDG Research, a third of Netflix users would consider changing tiers, more than half of which are moderately likely to or definitely would switch.

While Netflix has consistently spurned ads, the decision is not entirely within its control, according to Michael Greeson, president of TDG and SVP of Screen Engine/ASI.

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Indeed, with two of Netflix’s most-streamed programs — “Friends” and “The Office” — set to leave the platform after 2020, the SVOD service in under increasing pressure to spend on original content to fill the void.

“Netflix’s response to its thinning third-party library is to spend more on originals, which it’s gambling will keep subscribers from jumping ship,” Greeson said in a statement. “But with half or more of its most-viewed shows being owned by three studios, each of which is launching their own DTC services, how long can you convince 55+ million U.S. consumers that your service is worth paying a premium price, especially compared with Hulu (offers an ad-based option), Amazon Prime Video (free with Prime), and Disney+ (coming in a $6.99/month)?”

TDG contends Netflix will need to increase the subscription fees (which it recently did), or create a new revenue stream, such as advertising.

“This should not be an either/or decision, but that’s what it is,” Greeson said.
A separate survey of 1,000 Netflix subs by KilltheCableBill.com found more than 24% of respondents thought their plan was too expensive.

TDG’s research from late 2018 found that Netflix’s most recent price increase strained the limit of the service’s value, even before popular third-party shows are pulled from the lineup.

The research firm contends Netflix could “bullet-proof” its future with the introduction of a less-expensive ad-supported pricing plan.

“The stage is shifting,” Greeson said, “and if, like Blockbuster [Video], Netflix fails to evolve in a timely fashion, the company may see its domestic fortunes reversed.”

Netflix Spain Raises Prices

Netflix is continuing to roll out price hikes across Western Europe with Spain reportedly the latest country to see a €2 monthly increase to €12.99 ($14.80) from €10.99 ($12.52).

Netflix previously raised prices in Germany, Austria and Switzerland.

Netflix Spain also upped the fee for Ultra-HD on up to four devices to €15.99 ($18.22) from €13.99 ($15.94). The basic plan remains unchanged at €7.99 ($9.11) per month.

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Netflix in January raised by $2 its most-popular plan in the U.S. to $12.99 from $10.99. The basic $7.99 non-HD plan increased to $8.99, while the premium plan allowing four simultaneous 4K streams increase to $15.99 per month from $13.99.

Netflix Informing Subs About 13%-18% Price Hikes

Just weeks ahead of its first-quarter fiscal results, Netflix has begun informing subscribers by email of previously-announced (in January) price hikes ranging from 13% to 18%.

The increase adds $2 per month to the standard ($13) and premium ($16) plans of existing subs, while also increasing the price of the basic plan $1 to $9 monthly.

New subs since January already pay the new plan prices.

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Netflix said it would use the funds for continued original content spending, which increasingly includes feature-length movies.

In January, the New York Times reported Netflix would spend upwards of $18 billion on original content compared to $12 billion last year.

News of the price hike emails helped Netflix’s stock close up 76 cents per share to $367.72.

 

 

 

 

Netflix Upping Subscription Pricing

Netflix is raising the price for its domestic subscription plans.

The SVOD pioneer’s basic $7.99 single-viewer, non-HD plan is increasing to $8.99 monthly, while the standard $10.99 two HD streams plan is jumping to $12.99. The premium four-stream HD plan increases to $15.99 from $13.99.

The new pricing, which affects about 40 countries, impacts new subscribers immediately, while existing subs will be transitioned over the next 90 days.

“We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience,” Netflix said in a statement.

The service, which hasn’t raised prices since late 2017, hinted at a possible hike during the last fiscal webcast when chief product officer Greg Peters told analysts the service was justified “to increase price a bit.”

Netflix ended the most-recent fiscal period with more than 130 million paid subscribers.