Piling pressure from investors and bullish Wall Street analysts during the past year has finally caused Netflix to cave again – hiking its subscription price this week in the US only. The SVoD king need not be concerned though and despite widespread criticism, its next financial filing is expected to blow us out of the water. But ultimately, the move was once more the only way for it to justify its mammoth content spent, which shows no sign of slowing down anytime soon.
The surprise move has prompted calls for other OTT video service providers, and indeed music streaming services, to match Netflix pound for pound – with industry observers clearly now regarding Reed Hastings as the pace setting godfather in terms of pricing. But rivals and partner companies should not be so hasty, instead using the minor blip in Netflix’s consumer reputation to initiate all-out marketing campaigns to pick off the dismayed Netflix subscribers now debating alternatives.
That said, the growth of AT&T’s DirecTV Now streaming service was stunted following a $5 price hike implemented last August, reporting 39,000 subscriber additions in Q4 2018, almost 300,000 less than two quarters previous. Could Netflix be about to experience similar repercussions? Don’t hold your breath.
This sort of opportunity doesn’t come along very often, although when a price hike last occurred in October 2017, the impact on Netflix’s subscriber growth went by unnoticed – because there wasn’t one. Nevertheless, what’s to bet Disney, Apple and most recently NBCUniversal (see separate story in this issue) are wishing their own streaming projects were ready to launch asap.
The unpopular move will see the basic plan hiked from $8 a month to $9 a month; the HD plan from $11 a month to $13 a month; and the 4K premium package from $14 a month to $16 a month.
Naturally, Wall Street heralded the prospect of Netflix slimming down its $13 billion debt mountain which has driven financial experts up the wall in recent years with its record-breaking investments in original content. Netflix shares rose almost 7%, making it an almighty 40% stock surge since the end of December.
Goldman Sachs hit the nail on the end, projecting that Netflix’s 2018 annual earnings release “will only be the beginning of the pay-off from Netflix’s accelerating spend and increasingly robust originals slate”, adding that “consensus continues to significantly underestimate the financial impacts of these dynamics”.
Results are due out today and Faultline Online Reporter will miss them by a whisker due to the time difference. However, Netflix expects 9.4 million subscriber additions for the fourth and final quarter of 2018 – 7.6 million signing up overseas and 1.8 million domestically. This tally would beat its Q4 2017 subscriber uptake of 8.3 million.
Revenue for the quarter is expected to soar by 28.1% year on year to $4.2 billion, bringing its full year 2018 total to $11.7 billion, a 35% increase.
Faultline Online Reporter will dive into Netflix’s results in great detail next week should we more than likely miss the boat. The most interesting element by far will be the guidance for Netflix’s first quarter 2019 subscriber outlook – expect some harsh projections.
“We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience for the benefit of our members,” Netflix said in a statement.