Netflix To Keep Prices Steady, Unlikely To Meet Subscriber Projection
Netflix plans to hold prices steady for a long time. CEO Reed Hastings said the company is comfortable with a model that has it growing revenues by attracting more customers, rather than through raising costs.
“We’re very excited about (the) $7.99 price point and we have no plans to change that,” Hastings said on an investor call Tuesday. “Consumers value the incredible bargain that is and that helps our growth, so we see increased monetization from increased growth rather than any change in price.”
Netflix offers an unlimited streaming package for $7.99 a month in the U.S. Hastings’ comments came as Netflix reported a net gain of 1.16 streaming domestic subscribers in the third quarter, pushing its base to 25.1 million.
The company said in an investor letter that it plans to close the year with up to 27.1 million, which would be below the 28.7 million it had predicted earlier in the year. It began the year with 21.7 million.
Domestic revenue in the third quarter in the streaming business climbed $23 million to $556 million, up about 4% over the previous quarter.
Netflix believes Hulu is its principal U.S. competitor because of its ownership structure -- News Corp., Disney and NBCUniversal offer a content pipeline -- and its efforts to produce originals. Netflix referred to Hulu as a "wild card."
Furthermore, the company believes HBO will eventually launch a “direct-to-consumer” offering in the U.S. and “become more of a competitor to Netflix.”
Netflix also said its long-term opportunity for growth in the U.S. is two to three times greater than HBO’s TV service. Of the top-10 most-viewed TV shows via Netflix, six are exclusive.
Versus HBO, Hastings said Netflix has advantages in offering a greater variety of content, including in the kids genre. It’s also an exclusively “on-demand brand,” can be consumed on multiple platforms and its price is lower. (HBO is working to be known more as a multiplatform brand with its HBO Go streaming service.)
Netflix continues to push deeper into international markets, having launched in the Nordic countries last week. And, Hastings said he expects Latin America, where the company has 1 million subscribers, to be an “awesome profit source” in the long term similar to what DirecTV is experiencing in the region now.
Cable operators in the U.S. are looking to bolster TV Everywhere services, but Netflix said those aren’t impacting Netflix’s streaming. “The implication is that even the best TV Everywhere isn’t yet an attractive alternative to Netflix viewing for Netflix members,” the company wrote.
Hastings said Netflix continues to be a beneficiary of producers looking to monetize content via its service, while the company also has flexibility. “The great news for us is there is no single producer that’s a material part of our content,” Hastings said.