Discussion: Netflix Subscription Price Increase in 2016


  1. Exstreamist reports: "Next month, Netflix is going to increase the price of their monthly subscription from $8.99 to $9.99 and most subscribers have no idea it’s coming." One estimate is that 3-4% of its 17 million subscribers grandfathered at that price will cance.
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  2. Sounds high to me. Who else offers a commercial free mainstream streaming service for $9.99? Maybe Starz, but they lost their rights to new Disney movies in 2016 to Netflix.
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  3. The exstreamist article seemed kind of pointless, as though it was published simply to satisfy the need for constant content. I can believe that 80% of the grandfathered-in subscribers "didn't even know the price hike was coming." What's the point? That Netflix hasn't done a good enough job to keep them informed? My account is in this category, and on the My Account page, under Plan Details, this sentence appears: "Your streaming plan price is guaranteed through at least May 9, 2016." I'm pretty sure when they raised the price for new subscribers, they sent me email reassuring me of the same guarantee. What else would that mean except that there would be an increase at some point after that date? So the only valid point that one could make from the 80% statistic is that 80% of the affected subscribers aren't paying attention, or forgot. Not exactly the news story of the year.

    As far as 3-4% cancelling their subscription, the article doesn't specify that this would be 3-4% percent more than normally cancel their subscription each month, for any variety of reasons. When you're talking 17 million people, I'm sure there are some who cancel because the voices tell them to. If exstreamist is trying to make the point that people will cancel because of a relatively small increase after a long time of no increase, they're not convincing me. Are these the same people who stop eating because grocery prices go up? Oh wait, nobody does that.

    I can imagine someone saying, "Netflix is going to cost more now? You know, I kinda forgot we even have it - it just comes out of the bank automatically. We hardly ever use it, let's just cancel." If there is a 3-4% increase in cancellations, I suggest it's because the price increase serves as a wake-up reminder to some of those who haven't been paying attention to their bank statements, and forgot they're paying for something they really don't want or need. More snooze than news.
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  4. W72 and Carol: All good points. A dollar a month isn't a deal breaker for me. I don't know if there'll also be an increase on the DVD rate as well, but I'll still be subscribing if it's $2 more a month. The reason I put up the post, however, is that Netflix itself has not announced the rate increase. It's just letting the news leak out. Another example of Netflix not caring enough about its subscribers (us) to tell us what it's doing. Poor corporate-consumer relations, to my way of thinking, but this is the way Netflix operates.
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  5. One of the articles I read recently said that Netflix will notifying everyone who is being moved to the $9.99 plan by e-mail, but a fair point. Until I saw some of the articles on the price hike, I had completely forgotten about it although as Carol noted there is an expiration date for our grandfathered plans mentioned somewhere in our account information (which I never look at). On a scale of 1 to 10 of poor consumer relations, where 10 is the worst, I would give Netflix a 5. They get a 10 for letting Doctor Who go; a 10 for their Adam Sandler movies; and a 15 for not allowing me to reorder My List without going through hell.
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  6. Having now read over a dozen articles today alone about the Netflix price hike, I have three take-always. First, you have to be living under a rock to NOT know a price hike is coming in May.. Second, almost every article I have read states that Netflix is still an incredible bargain compared to other streaming services, and it's price increase is minuscule compared to the average annual price increases for cable TV providers. Third, the 3 to 4% churn rate (which is over and beyond the regular churn rate) comes from a note and survey done by a Union Bank of Switzerland (UBS) analyst. There is a separate JP Morgan analyst note out that cites its own survey of Netflix users and estimates a churn rate of 10 to 15%. The UBS note references its own survey and the JP Morgan survey and concludes that the JP Morgan estimate is wildly inaccurate. In any survey on price hikes, you get a whole host of people claiming they will not tolerate ANY price increase. UBS cites a survey it did of a proposed price hike for cable subscribers where 68% of the respondents said the would drop their service if there was a price hike. In reality, the actual incremental churn rate after the price hike was less than 1%!

    Netflix reports its 2016 Q1 results in a couple of weeks, and I am sure Reed Hastings will have some comment then. My guess is that he will note the significant increase in original TV content, the large number of films to which they have bought exclusive streaming rights; the Disney deal; and Netflix's monthly cost vs. HBO. Incidentally, HBO hasn't had a major hit since Game of Thrones. Vinyl, which was supposed to be Netflix's next big hit has been a ratings disaster; recently, Terrence Winter, who was showrunner and also wrote for The Sopranos and created Boardwalk Empire, left after "creative differences". Two David Fincher pilots were not picked up as series by HBO and Fincher is now developing the TV series Mindhunters at Netflix. Finally, Westworld (a TV series adaptation of the novel and movie by Michael Crichton) was supposed to appear on HBO late last year, then this year and has now been pushed back to next year. HBO still is coming out with some great original films and documentaries, plus they have deals or first-window rights from every major Hollywood studio except Disney and Sony, but their dominance in original content is being challenged by Showtime, Starz, Netflix, Amazon and Hulu as well as from cable stations like AMC, FX, BBC America and Sundance TV. You can add in Acorn TV for some great British, Canadian and Australian TV shows and MHz Choice for Nordic noir and other excellent European mysteries. It's a brave new world out there but I think Netflix will be one of the survivors. While I have other differences with Netflix like the relatively thin list of good older titles, their affinity to padding their newer film content with direct-to-video schlock, their unwillingness to aggressively pursue output deals with independent producers (instead leaving that field to Amazon), and their unwillingness to let their customers download content and watch off-line (particularly good while flying or being in foreign countries where internet access is poor) and which goes totally against the stated Netflix philosophy of ""Watch anytime, anywhere", I don't think I will be part of the 3 to 4% churn when the price increases.
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  7. Sorry for the typo. Vinyl was supposed to be HBO's next big hit, not Netflix's.
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  8. Thanks for starting this discussion, CanandaiguaNY. I’m glad you posted what exstreamist had to say about the price increase, even though I didn’t think the article was strong in journalistic integrity. I like meaty pieces, with research, background, and analysis - like what Wellesley72 has now given us. (And many thanks to you for that, Wellesley72!)

    I’m curious to know the specific date of the price increase, as in, more money has now come out of my bank account. The exstreamist article says, “Next month, Netflix is going to increase the price of their monthly subscription. . .,” but, as noted in my previous comment, my “plan price is guaranteed through at least May 9, 2016.” So, the specific date of the increase is important when deciding if Netflix is giving enough notice. (Again, sloppy writing.)

    I’m expecting to hear from Netflix, probably in email, about a month before my bank account is charged the higher rate. If that’s what happens, I think that is adequate notice, and nobody has any right to cry, “no warning!” Also, it would give everyone ample time to cancel if they so choose.

    Netflix has a number of aggravating flaws, but they do some things right, and I can’t fault them when it comes to this particular issue - at least not yet.
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  9. I've still heard nothing from Netflix about price change. A more credible source than Exstreamist, Bloomberg, reports that there will be a $2 per month increase for grandfathered subscribers, like me, who are now paying $7.99 per month. From that article:
    "Netflix will boost rates by $2 a month for customers who have been subscribers for more than two years, while customers who signed up between May 2014 and September of last year will shell out an extra $1 a month. This will affect customers at different times over the course of the year.
    "Just 20 percent of those users are aware of the impending price increase, while 12 percent to 15 percent may cancel their subscription, according to a survey by JPMorgan Chase & Co.
    "The adjustment will have some effect on Netflix’s business, but not a dramatic one, according to JPMorgan’s Doug Anmuth. He reduced his projections for Netflix’s subscriber additions in the second quarter by 404,000.
    "The price increase will have a more positive effect on Netflix’s bottom line. The company has reported higher profits from its domestic streaming business every quarter since it broke the division out in 2011."
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  10. Kimmy Schmidt will be visiting you personally to give you the news--unless you plan on cancelling. In which case it will be either Frank Underwood or Pablo Escobar.
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  11. Carol, Netflix just released its 2016 Q1 letter to shareholders. There were 6.74 million new adds worldwide, including approx. 2.23 million in the U.S. Both were above forecast. Netflix has approx. 81.5 million streaming members.

    An interesting discussion of un-grandfathering. It will happen slowly over the course of 2016, not just in May. The longer a person has been a subscriber, the later the un-grandfathering. Before a subscriber sees a price change, a dialogue box will pop up somewhere and show the various options, from the $7.99 one-screen SD plan to the $13.99 4-screen UHD plan. Presumably, if you don't like any of the options, you can cancel although whether that was an option in the "dialogue box" was not mentioned. Netflix stated that the slow roll-out on un-grandfathering is to preserve its brand integrity. It also allows Netflix to divide any churn among three quarters.

    I am assuming the letter to shareholders was written prior to Amazon's revelation last night that it will offer a streaming only service for $8.99/mo. There is no mention of the Amazon stand-alone plan in the letter to shareholders, although I am sure it will be brought up on a conference call with analysts that begins at 2 PM Pacific time. The letter does mention Amazon, Hulu and HBO, among others, as competitors.

    Netflix also indicated a content spend of 5% of its budget on original films (including, I suspect films made by third-parties to which Netflix has exclusive global rights). This may change according to the reception of the movies. Total content spend for 2016 is about $4.2 billion.

    Otherwise, no earth-shattering announcements. Some reference to the good viewer reception for Fuller House and the second seasons of Daredevil and House of Cards. Some mention of the new Chelsea Handler show (new episodes on Wednesdays, Thursdays and Fridays of each week), and some mention of their international original programming. One sentence on still thing about China. Also, more native languages and local programming coming for their new territories.

    International subscription adds will slow down in some markets. Netflix specifically mentioned Australia, where adds have doubled over the last year. They don't expect that add rate to continue at that pace over the next year.

    My own comments on Amazon's streaming-only option. Either they think that Amazon Prime has reached the outer bounds of expansion, or they are trying to chip away at Netflix subscribers who are resistant to forking over an additional $2/mo. to Netflix (actually only a $1 increase over the Amazon stand-alone streaming service) or $11.99/mo. to commercial-free Hulu subscribers. I don't think this move will have a big impact on any of the three services. I have full Amazon Prime and have enough little purchases during the year to make it worthwhile.
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  12. Thanks for this update, Wellesley72. Interesting, and it's good to get more info about the "when" of the price change. Also happy to hear about Amazon offering a monthly pay option. I think the full-year-up-front pay plan kept a lot of people from subscribing.

26 comments:

  1. A couple of corrections and some additional comments:

    1. The comparison of the increase in Australian/NZ subscribers was not year over year but Q2 2015 over Q2 2014 (around 100%).

    2. Netflix's content spend in 2016 is about $5 billion on a P&L basis and will increase to $6 billion on a P&L basis in 2017 (more on a cash basis). I confess that I fell asleep during "Accounting for Lawyers" in law school so I can't tell you what the difference is.

    You may have noticed that Netflix stock was down about 10% today, principally on the low number of projected adds in Q2 of 2016. I think the projections for net domestic adds was 500,00 and total adds (domestic and international) of 2 million.
    These are fairly low numbers and are extremely conservative on the part of Netflix. Q2 of any year has been a slow quarter for Netflix. Since they seem to be un grandfathering the newest subscribers first, I think they are expecting more churn than with subscribers who have been with Netflix longer.

    Since Netflix does not break out international subscriptions by territory, it is difficult to tell where they are doing well. From other statements they (and others) have made, they appear to be profitable in Latin America, the U.K. and Ireland, the Nordic states and probably in Australia and NZ. My guess is that they are doing well in Spain, Portugal and Italy although not turning a profit. I also think they don't have many subscribers in France and possibly Germany. Across their new territories, particularly Eastern Europe, Asia and Africa, they probably have very low numbers of subscribers due to lack of content, price and/or language barriers (most Netflix content is in English, with subtitles in French, Spanish, German, Italian, Japanese and Chinese). Presumably more local content and additional languages will be offered in these territories in the future, but probably not in the next 3 to 6 months. You can almost predict where Netflix is looking to increase subscriptions by looking at where their international content is being filmed and in what language. If Netflix is predicting growth of 1.5 million international subscribers, it's probably virtually all going to be in Western Europe. I am still perplexed as to why Netflix rolled out in 130 countries at one time instead of a more systematic regional approach since if you go to UNOGs and click on a particular territory like Lithuania or Nigeria, you are looking at mostly US and UK content, all of which is in English. About the only non-English speaking territory with content geared to them is Japan. There are probably more Indian movies and TV series shown in the US than in India.

    Most of the comments I have seen on the Netflix Facebook page relates to the lack of good recent movies on Netflix. There was no mention in Netflix's letter to shareholders of the Disney deal, which probably means no new movies from Disney in Q2. (There was a mention of producing original movies instead of waiting nine months for VOD rights--I hope that wasn't a reference as to how long we will have to wait for Disney/Marvel/Pixar, etc. movies.) There are also the usual complaints about Netflix not carrying as many TV series as before, although you really can't blame Netflix if TV studios won't sell them content or if the price of licensing content has increased 400% over the last five years. On average, so far this year Netflix has added an "original" (in the form of a series, kid's show, documentary, film or comedy special) once every week, and it looks like they will continue to do that for the remainder of the year. Most of these are "global originals" so they are bulking up their content world-wide. Of course, how a series like Fuller House or F is for Family "fits" in Asia and Africa, particularly where there is much more strict censorship, is another story.



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    1. More interesting Netflix news. It's a luxury to have the salient points covered - with insightful comments included - without having to read everything that's out there myself. Thanks.

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    2. Fuller House is not offensive at all. It is the only non animated non kids original I can actually watch.

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  2. Sorry if this has been said already, skimmed the page and didn't see it: The one-screen, standard-def $7.99 plan will still be available for long-time customers. I am on that plan and do not expect to see any price increase. That's my understanding anyway.

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    1. My rates are not going up until June.
      "Your plan price is guaranteed through at least June 16, 2016."

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  3. Thanks, will g. Wellesley72 did mention this in the comment dated 4/19, 5:18 a.m. (one of the copied comments, just before the "real" comments on this page). But I'm glad you mentioned it, because how much and when is the crux of this topic.

    Below is what Wellesley72 wrote about this. It is from the recent Netflix letter to shareholders. I'm sure everyone who comes to this page will find it interesting and informative.

    "An interesting discussion of un-grandfathering. It will happen slowly over the course of 2016, not just in May. The longer a person has been a subscriber, the later the un-grandfathering. Before a subscriber sees a price change, a dialogue box will pop up somewhere and show the various options, from the $7.99 one-screen SD plan to the $13.99 4-screen UHD plan. Presumably, if you don't like any of the options, you can cancel although whether that was an option in the "dialogue box" was not mentioned."

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    1. I did see that. I guess the way it was worded, it didn't register that he was pointing out the same thing. But yes, it bears repeating!

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  4. My account NOW says "Your plan price is guaranteed through at least June 16, 2016." I have subscribed since Oct. 2013.

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    1. Yes, my account info has also been updated to say June 16. My subscription goes back about 5 years. Maybe everybody has the "at least until" June 16 message, but the actual monthly increase date will depend on length of subscription. We'll see what happens.

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  5. Same here I been a subscriber since June 2010.

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  6. I've been a Netflix customer since 2002 and a streaming subscriber since they began offering it. My account profile states:
    "Your streaming plan price is guaranteed through at least October 8, 2016."

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    1. Interesting. Mine still says June 16, so it looks like the roll-out is for real, and long, long time customers are getting several extra months before an increase. Thanks for writing, Gene.

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  7. I noticed an ad for Amazon Prime that said, "Now available for $8.99/month." It made me remember the June 16 date on my NF account page, and wonder what's happening with that. So I checked, and it now says:
    "Your streaming plan price is guaranteed through at least July 16, 2016.
    You will be notified 1 month before your price changes."

    So, another month at least at the old price. I wonder how much Amazon's advertising of their $8.99 rate is impacting NF's decision to delay raising prices. Go Amazon!

    Also, I'm pretty sure the note about giving us a month's notice before the change wasn't there before. Maybe the exstreamist article had something to do with NF adding it? Go exstreamist!

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  8. Well, that didn't take long. Today I received this email from Netflix, with the subject, "Important Membership Information":

    Dear Carol,
    When we raised prices for new Netflix members in 2014, we kept your streaming price the same for two years. Your special pricing is now ending and as of 7/21/16 the new price will be $9.99 per month.
    Please visit netflix.com to review the details of this change and your options for plans and prices. To cancel your membership before the price change takes effect, you can do so at any time by going to Your Account.
    As always, if you have questions, we are happy to help. Please visit the Help Center for more information.
    –The Netflix Team

    There's also a notice at the top of the page when I look at "My Account." I guess this means my account is being refreshed.

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  9. I also have this on My Acccount page:
    "Your streaming plan price is guaranteed through at least July 16, 2016.
    You will be notified 1 month before your price changes."

    But I've no Notice of a price increase. I suppose either because I'm in a different region, or because I also have a DVD plan, my increase is put off for a month or more.

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    1. Hi CanandaiguaNY - I also have a dvd plan, so that's not it. The 21st is the day NF takes $$ out of my checking acct. Whatever day yours comes out, look for the email - apparently when they say they'll give one month's notice, they mean exactly one month.

      It could also be that you've had your account longer, so even though you've got the 7/16 "at least" date, you'll get another month or two. I think my acct goes back to 2011. Or, it could be the region thing, or some other variable.

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    2. No knowing what the NF criteria are. I've been a member since 2008. My billing date is the 14th. So I guess that means I'll not get the higher price until at least August 14.

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  10. I have been a subscriber since 2004 and I am getting the popup now. It says I am paying 9.99 for HD streaming. For the longest time I never got a movie in HD then I was getting HD streaming the day after Netflix made their deal with AT&T about back end. Now I have never seen HD again since they were moving to Amazon Cloud, coincidence or not. So now that they have linked price to my expected output does that mean there are going to be a lot of class action lawsuits when I am paying for HD streaming and not receiving HD streaming?

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  11. I just got my price increase email today. I also noticed that my plan is currently on 4 screens and with the increase will drop to 2 screens. Not that I ever use 4 screens, but I'm just thrilled that I will be paying more for less.

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  12. Got my notice yesterday. When I went to the homepage it also gave me the message which after I clicked I got another email saying I changed my plan. Stupid as I am forced to click to do anything. I have been a subscriber since June 2010.

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  13. I just got my notice. It's August 14, 2016 for me. :(

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    1. August 14 for me too, but no indication of any change in plan or terms.

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  14. I have finally received notice of my Netflix price increase which takes place on August 16. While the e-mail I received referred to an increase to $9.99/mo., it did state that you could look at other price options on the Netflix web site.

    The e-mail also listed three coming attractions: Deadfall (2012, an Eric Bana thriller; Sleepy Hollow (the Fox series); and a British documentary series called Battlefield Recovery, where a group of Brits go to Eastern Europe with a backhoe and dig for Nazi war relics. The reviews I could find of this series called it gross and inappropriate meaning, I assume, that Netflix probably didn't pay much for the streaming rights. If this is a Netflix original or exclusive, I wish it a much shorter shelf life than Season 1 of Scrotal Recall. Actually, I wish it a shorter shelf life--period.

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  15. Netflix reported its 2016 Q2 results after the stock market closed today. The good news was that their revenue and profits were higher than projected. Unfortunately, stock analysts were looking to net subscriber additions which were terrible. Netflix had projected net domestic adds at 500K; instead, net adds were 160K. International net adds were projected to be 2M; they came in at 1.51M. Reed Hastings said that the reduced number of net adds in the US were due to higher-than-expected churn among subscribers whose rates had gone up or were about to go up. He blamed this on press coverage claiming that Netflix was raising its prices rather than simply ungrandfathering subscribers! (Sure looked like a price hike to my credit card.). I think there were also price hikes (sorry, ungrandfatherings) in some overseas territories and also in Canada.

    Other than noting the new CW contract and their deal to show the new CBS All-Access Star Trek series as an exclusive in all territories other than the US and Canada, Hastings had no real news to share. Netflix will be adding more local content and subtitling in Polish and Turkish to those territories. (in light of last Friday's failed coup, Turkey was probably an unfortunate choice.). Other territories will follow at some point in time. Hastings also made a point of stating that each Netflix territory where streaming started prior to 2014 was profitable--that's the US, Canada, the UK, Mexico and parts of Latin America. No mention of how they are doing in France, Germany, Spain or Japan (or anywhere else). Internationally, people like English-language programming (probably news to the Japanese) but Netflix has series in production in Mexico, Latin America, Spain, Germany, and Japan. Also in the UK, where a form of English is spoken. No mention of the shrinking Netflix catalogue in the US which just might have contributed to the churn. No mention either of the lack of decent notice when movies are about to expire.

    Hastings also said that Netflix will be materially profitable in 2017. As noted in its Q1 report, Netflix will also be borrowing more money since its cash flow is constantly negative. No word on when that might change.

    Projections for Q3 are 500K net adds in the US (which is low) and around 2M international net adds (also low). Netflix stock dropped 15% in after-hours trading.

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  16. Netflix is also profitable in the Nordic countries which they entered prior to 2014.

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