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Could Netflix raise prices even higher? There's room, survey says

LOS ANGELES--Netflix is in the midst of shifting millions of U.S. subscribers to its standard $10 per month two-stream HD plan--and it blamed higher churn and lower sub growth in the second quarter in large part on the price hike.But a new survey...

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A new survey indicates the No. 1 subscription VOD provider still has a lot of pricing power left in its bag of tricks: 21 percent of Netflix customers said they would pay $16 or more per month for the streaming service, according to a survey by TiVo's Digitalsmiths unit. REUTERS/Mike Blake/File Photo

LOS ANGELES-Netflix is in the midst of shifting millions of U.S. subscribers to its standard $10 per month two-stream HD plan-and it blamed higher churn and lower sub growth in the second quarter in large part on the price hike.
But a new survey indicates the No. 1 subscription VOD provider still has a lot of pricing power left in its bag of tricks: 21 percent of Netflix customers said they would pay $16 or more per month for the streaming service, according to a survey by TiVo's Digitalsmiths unit, which polled 3,114 adults in the U.S. and Canada in Q2 2016. Around 8.4 percent said they were willing to pay $16 to $19 per month, with 6.5 percent citing the $20 to $23 range, 3 percent coming in at $24 to $27, 1.7 percent at $28 to $31, and 1.4 percent saying they'd pay $32 or more.

At the same time, 29.3 percent of respondents said they would refuse to pay any more for Netflix than they're currently shelling out, per the Digitalsmiths survey. And 39.1 percent said they would pay, at most, $12 to $15 monthly (while 10.6 percent did not provide an answer).

For now, don't expect Netflix to make major adjustments on how much it charges-the risk of a massive subscriber exodus outweighs any revenue upside. One disgruntled Netflix user is even suing the company over the latest price increase, alleging the company promised him a lifetime guarantee that rates would not go up.

But the survey results show that in the years ahead, as Netflix keeps adding more exclusive and original content-next year it plans to spend more than its projected $6 billion 2016 programming budget-it will have leeway to raise prices further.

Netflix's potential runway to raise prices is also clear when you look at what people spend on pay TV. About 35 percent of consumers Digitalsmiths surveyed said they spend $100 or more on cable or satellite TV per month, while 49 percent pay $51 to $100 per month; 16 percent said they spend less than $50 on pay TV.

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Still, people today spend a lot more time watching conventional TV than streaming video. About 59 percent of SVOD users watch two hours or less of content on those services per day; only 4.8 percent watching 5 or more hours daily, according to the survey-while the average U.S. household watched about 4.5 hours of traditional TV each day in the first quarter of 2016, per Nielsen. Of respondents who use SVOD services, 92.8 percent do so on a weekly basis.

Meanwhile, the Digitalsmiths survey found that 10.4 percent of Netflix and other SVOD users don't pay for their service because they use another subscriber's account. While a recent federal court ruling technically makes unauthorized sharing of passwords to an internet service illegal, Netflix and other providers say such multi-user access is kosher within certain bounds.

Related Topics: MOVIES
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