We’ve seen a spate of subscription price increases among the major streamers of late. While the pricing for the Western Europe and North American markets will remain steady, Netflix is bucking the trend and dropping its pricing for over 100 of its smaller markets. What’s behind this move to make streaming businesses more profitable? Brandon Blake, our expert entertainment lawyer from Blake & Wang P.A, analyzes the details for us.
4% of the Subscriber Base
Firstly, while 100 markets sounds mighty big, it’s important to realize that this price drop should affect a little over 10 million of their 230 million subscribers. So in reality, we’re talking about 4% of the overall subscriber base. Most of these markets are in the non-Western European, Middle East and African, Asia Pacific, and Central/South American territories. While some of these territories do offer a strong and competitive market, most suffer from currencies ill-placed against the dollar, and an overall poorer economic outlook than their West European/North American segments. The price drops range from 20%-60% of current costs, and will apply to existing subscribers as well as new onboardings.
Optimized Returns
With that perspective in mind, it becomes a little clearer as to why the company would consider the move. Netflix was until very recently the highest-priced streaming subscription in the North American market, and still hangs on to second place. With a more flexible pricing that’s friendlier to economic conditions in these emerging markets, Netflix are clearly chasing an opportunity to position themselves more favorably in slower, but growing, markets internationally- one of the few areas currently still onboarding large volumes of streaming subscribers.
Plus, Netflix could do with some good press after their much-lampooned choice to remove password sharing on accounts. Offsetting the effects of higher inflation and the negative effects of the strengthening dollar in these markets does make sense. Lastly, in doing so they also effectively position their standard tier at the old basic tier pricing for most of the affected markets- an incentive to see it as a ‘free’ upgrade to leverage.
So potential subscriber growth with an attempt to offset economic-based declines in existing customers in fragile markets where they have smaller customer bases and want to encourage some subscriber growth does make sense, even if it feels a little counterintuitive at first. Will it work? We’ll have to wait and see.
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