Naifei announced a price increase on Tuesday (January 15th) and its market price in the US rose 13% -18% on average.The company has launched streaming media services for the biggest price increase over the past 12 years.The price increase will come into effect immediately for new users and will have a three month buffer period for old users. The rise in prices is expected to affect 57 million US consumers. From the point of view of social networks, consumers seem sad.
But the market gave a warm response. After the news came out, the company's stock price rose sharply, reaching its biggest one-day gain from December 27 last year, ending at $ 354.64, the highest value since October 17 last year.
As a member of "FAANG," Netflix's price increase is reminiscent of Apple's rising iPhone pricing. Does this increase in price mean that Netflix follows Apple's footsteps?
On the rise in prices, Naifei planted the head
In the second quarter of 2016, due to the increase in the price of the base 2014 package,Grandpa Clause"The impact on the deadline, the new media streaming company's users reached a minimum of two years, with the company's stock price dropping 16% after the closing.
The non-grandfather clause is unlawful, the disability clause is a provision that some people or certain entities have been involved in activities in accordance with previous regulations and the new provisions may exempt them or their obligations. Not subject to the new laws and regulations, continue to act in accordance with the original provisions. Netflix's unfedfathering is the price at which it starts asking older old users who have previously enrolled at a lower price to pay for the increase.In 2014, Naiyi raised his price for the first time, and the core package associated with it was raised from $ 7.99 to $ 9.99, and old consumers began paying new prices in May 2016.
At the telephone conference this year, Hastings CEO also admitted in response to a Morgan Stanley analyst question:Consumer noise is not due to increased competition, not because the market is saturated. The only explanation for the change in user data is that users do not like the price of Naifei.
From this price increase, we can also see Netflix's judgment.
The minimum initial bundle only increased the price from $ 1 to $ 8.99, with the lowest price increase in all packages, the company continued the previous Grandfathering clause, and old users delayed the upgrade.
(Source: JP Morgan Chase Research Report)
But Netflix is not Apple, and the pricing system is more detailed and complex than you think.
From the point of view of the absolute price, the Netflix price increase is clearly taken into account.
Price research company priceintelligently previous data shows that the lowest income group of the Netflix North American consumer groupThe price range is $ 8-11The increase in Naifei's minimum package price is still within the allowable limits.
From a horizontal comparison, the Netflix price is a bit cheaper than the $ 15 monthly cost of the HBO Go media project. Prices are also lower than the Amazon price (Amazon's streaming service is included in the basic membership service that includes a set of services $ 119 / year, $ 12.99 / month), but slightly higher than the price of Hulu (Hulu's pricing is more) The company's most popular streaming media streaming ad is $ 5.99 / month (just down the price) and the Netflix-like project is $ 11.99 / month.
Considering the cost of the package, the quality of the connected videos also deserves attention.In the recent Emmy Awards, Naifi has led 112 nominations (Amazon and Hulu can be said to be on the move), and old Evergreen HBO won 108 nominations in recent Oscar nominations,The film "Naifi" Rome was first nominated for Oscar's best film, which was not done by other media.
RBC Capital Markets analysts said that although this is the fourth time that Netflix has increased its pricing, consumers have no cheaper options for operators offering such services, even if Amazon is considered a Prime subscription service, Naifei alone raise your price to match the level.
From a consumer community perspective, the Netflix price increase is called a true harvest.
According to the survey, two types of Netflix users are the least sensitive to price changes:Many families of children and users with a high quality demand for streaming media services (HD, etc.).
This can also explain why Netfair's multifunctional equipment and high-quality service packages are more expensive than the minimum package.
Pricing of Netflix also follows its location of prices.For the time being, this price increase is only on the US market and South American countries with a large population base are temporarily unaffected (the market expects Mexico and Brazil to account for about half of Netflix South America's total users).
Why Choose USA?
Through this price increase,Naifei only increased revenue on the US market for one year (no profit, no cost), 1.18 billion dollars in revenue(Q3 US AP11.44 US dollars, 57 million paid members, average 15% increase in prices). If the corresponding price increase is spread on the international market, Netflix is expected to receive revenue of 2.39 billion yuan annually (Q3 international users APRU 10.23 dollars, 130 million consumers, average 15% price increase).
A market explanation is that Netflix uses the US market to subsidize its international growth.,
From growth data,Net consumer growth in the Netflix international market is far lower than the international market.As a growing company, the international market is moving more and more companies. The company's latest fourth-quarter report shows that the number of paid consumers in the domestic market is 58.49 million, an increase of 1.53 million and the number of paid consumers on the international market is 80.77 million, an increase from 7.31 million, and the number of new additions is 1.21 million higher than leadership, record high.
At the same time, although the overall competitive pressure of the company on the international market is lower than that in the United States,However, on some important international markets, Netflix faces fierce competition.In India, the world's second-largest media market (China's No. 1 market is temporarily unavailable), Netflix's market share is still lagging behind Disney's Fox Holdings Hot Star, owned by Star India.
Another explanation is that the company has adapted its competitive position before more rivals flood the US market.Stream Disney's media platform will enter the market later in 2019 (Disney also invests in Naifei Hulu's rival), while Comcast's Channel will enter the US market in 2020.
More interesting is thisIn the latest quarterly Netflix Revenue Report,The company claims that compared to other competing media such as HBO, this year's popular Fortnight Night online game and YouTube's free video site give the company more competitive pressure:
We have already earned about 10% of the time on the national television screen.This ratio is a bit lower in the mobile phone … Compared with HBO, we competed (and lost) with Fortress Night more times, on YouTube last October, a few minutes of global staying. Inside, our volume and registration of the broadcast sharply jumped (I note: similar things happen to another Pornhub video site) … This is a highly fragmented market, we are facing thousands of competitors,Everyone robbers the weather usersBut our focus is not on Disney +, Amazon or other companies, but how to improve and improve our user experience.
The price increase will also provide additional funding for Netflix in step-by-step interest rates: In October last year, the company announced the issuance of $ 2 billion in US dollars and euro-denominated bonds to finance high costs for original film and television programs. ,
The Netflix price adjustment strategy is consistent with the overall investment in the company's content (Hulu chose to cut prices after the Naifei price correction.) If more rivals flood the US market, whether Netfair will reduce price competition, it deserves attention).
Prior to that, the chief employee on the content of Tefi Sarandos discussed the company's investment philosophy at the 45th UBS Media Conference:First, transforming the user, vigilance reduces returnsIn an interview he said:
When we increase the content budget, we'll look at where its maximum usage is. Can I increase my viewing time? Can we get more new users? Can you increase consumer loyalty? These are the internal discussions we have done, and we are very focused on how to spend every penny from the top.
What is the status of enough content? "
This is the most ideal state Consumer growth and the growth of content investments are on the brinkMany people askFor Netflix, what is the status of enough content?For us we will see a moment of declining return,Then our investment is more than the investment of the user, the user's usage time is no longer increasing, and the number of subscribers is no longer increasing.These three factors – the cost of content, the timing of use, and the retention or change of the user – are closely related.
If there are signs of a decline in returns, of course, this sign has not yet appeared and we will respond in time.
Considering the contrast between growth in the US market and the international market, the Netflix price increase does not seem unexpected.