Netflix is flying high right now, and it’s easy to forget that just a few years back the company’s share values tanked and many industry insiders were doubting its future. One prominent analyst thinks the pendulum has swung to far the other way recently.
Wedbush Securities analyst Michael Pachter thinks that Netflix’s stock is being artificially propped up by investors as the company continues to announce big subscriber adds and major content deals.
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The party could soon come to a crashing halt, says Pachter, who believes that a price hike is all but inevitable.
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Customers and Wall Street responded very unfavorably to Netflix’s previous price increase in the summer of 2011.
Pachter believes that if Netflix were to increase its prices, the company’s bottom line would not be correspondingly benefited, as content providers would likely jack up the rates they charge the streaming service. Said Pachter:
“We would expect content providers to seek higher fees for content, in a manner similar to movie studio deals with theatrical exhibitors . . . The studios share in ticket sales, irrespective of ticket price, although minimums are set for film rent. We think that Netflix’s current content deals reflect minimums, and believe that if Netflix were to increase prices, content costs would rise in lock step.”
What do you think, Insiders? Is Netflix due for a price increase, and will its share prices tumble if margins are impacted by increased content costs?
[via Home Media Magazine]
Greedy, greedy bastards (Hollywood). When is enough enough? Leave us alone and let us enjoy our $8 streaming.
No one wants to pay more. But I feel that if I pay $55 for satellite but watch Netflix 90%+ of the time, the prices are wrong somewhere. If only my wife would agree I would drop the satellite. Netflix to me is a bargain at $8. The satellite is a ripoff!
Netflix would be perfect if it had new releases like on PPV. I would pay a per-movie price for new releases if it was all in one place with all the other offerings Netflix has
Consumers priced that a price increase makes them reevaluate their usually left alone entertainment subscriptions.
The economy is still too tight for an increase.
Proved that a price increase…