With little warning or hinting, Netflix drastically changed its pricing plans last Tuesday.
The DVD & Streaming option, previously offered for $9.99 a month, was upped to $15.98 a month. While DVD only and Streaming only plans are being offered for $7.99 a month.
With approximately 24 million Netflix subscribers, there’s little doubt that this move must have irked some of its faithful users. Added to that is the fact that Netflix isn’t grandfathering its current users – the pricing changes will be in effect for existing users come September.
New users have been seeing the new pricing plans since its release last week.
Netflix is arguably the leading online-streaming provider when compared to its competitors Hulu Plus, Amazon Prime Video, but this recent change might well change the dynamics between the competitors.
Where it used to be Netflix had both DVD & Streaming for only $9.99 while others like Amazon Prime Video and Hulu Plus could only offer online streaming, and for $6.58 a month and $7.99 respectively, the choice was usually fairly clear-cut.
With this change, there might be less of a reason for online-streaming users to choose Netflix over Amazon Prime Video or Hulu Plus in terms of pricing.
And for the current subscribers that are already used to the $9.99 pricing, a 60% hike to $15.98 for the same service they’ve been using might not be justifiable.
Now, Netflix still has one of the largest catalogs amongst its competitors. It has approximately 750 shows and 8,250 movies, while still constantly growing. For movie aficionados, it’s possibly still the more enticing service offered compared to its competitors.
But this recent pricing change might be due to looming contract renewals and rising licensing costs with major content owners like Sony, Warner Bros and the like.
In a market where Netflix used to be the only real provider, other companies, such as the aforementioned Amazon and Hulu, as well as Google and such are now bidding for similar contracts as well.
Content providers are beginning to realize the value and worth of what they have been offering to Netflix, and with a pool of bidders interested in the content rights, Netflix might have to cough up significantly more money for the same content they’ve been offering.
According to a report by CNN, Amazon and Google have much more cash on hand than Netflix ($7 billion and $37 billion compared to $342 million). At the same time, Netflix is expanding itself to over 40 new countries.
This leaves Netflix in a position that’s not really favorable for them, even though they’re the leading pioneers in successfully tapping into online content streaming and subscriptions.
They’re facing the risk of turning away current and new customers with their price hike, they’re considerably smaller than their competitors (Amazon and Google, while Hulu is on-sale), and licensing costs are estimated to hike up significantly.
The coming year will be an interesting year with the increasing popularity and accessibility of online-streaming, the growth of Blu-ray content (which Netflix prices separately) and the addition of major titans into a previously unexplored market.
