Between its DVD by-mail and streaming services, Netflix has garnered a substantial share of the home video market in recent years. Along with Redbox, Netflix has decimated the once-unstoppable Blockbuster Video juggernaut and helped usher in a new era in the industry. Part of Netflix’s success is due to its affordable pricing, with monthly plans starting at $8.99 for one DVD at-a-time and unlimited streaming. Forbes has run an interesting article detailing the factors that could drive Netflix’s pricing upwards. Here are some highlights from Forbes‘ reasoning:
Rising demand for online content
“. . . According to an [online poll], 46% of 18 to 25-year-olds surveyed said that they spend the same amount of time viewing online videos as they do watching traditional TV. About 32% indicated that the computer is now their preferred platform for consuming on-demand video.
Netflix can potentially take advantage of this demand shift to raise its subscription prices. Netflix’s prices have room to rise because they are substantially cheaper than rates charged by on-demand competitors like Comcast.”
Improved content allows tiered pricing
“Currently Netflix is focused on bringing older movies and TV shows online. But if the company can license relatively newer content for download, it could justify a tiered pricing structure. In this case, customers would pay a premium to watch newer content. Tiered pricing, in turn, could drive growth in average subscription fee.”
If studios demand more profits, Netflix may have to pass on cost to customers
“In exchange for a 28-day delay in renting new releases, Netflix has been able to license online content cheaply. But . . . content owners are increasingly demanding higher profits. Over time, Netflix might be forced to spend more on content acquisition than it currently does. In order to protect its margins, the company would likely pass these increased costs on to customers, creating additional upward pressure on subscription fees.”