There’s talk of Netflix increasing prices for a second time in 2 years. The last time they increased prices was in 2017 across their highest 2 tiers of customers, but this time, word has it, they will increase prices across the board. In this post, I will examine what Netflix’s original pricing was when they first split their service into different tiers. What their pricing was in 2017 when they first increased the cost of their streaming service, and what they are planning to charge for each of their tiers this year. I will also examine what you get at each tier level, and if the cost of their service is worth the subscription price. One point I would like to mention is that the prices that I list here do not include sales tax. If Netflix charges sales tax where you live, that is in addition to their base prices.
When Netflix first started their tiered subscription service, it would have cost you $7.99/month for a basic one screen subscription with no HD, or $95.88/year. The next tier up for Netflix was $9.99/month if you wanted 2 screens and access to HD streaming, or $119.88/year. Their premium service tier was $11.99/month for 4 screens with Ultra HD streaming, or $143.88/year. These yearly costs are just for comparison, as Netflix doesn’t one to pay a yearly service fee. Unlike Amazon Prime, which does provide a yearly subscription service and offers a break to customers who pay the yearly amount.
When Netflix raised prices to in 2017, they raised the price of their top two tiers (HD and the UHD streaming) for subscribers. However, their base tier cost stayed the same at $7.99/year or $95.88/year. The second tier, or standard subscription (HD) went from $9.99/month to $10.99/month for the same streaming service, or $131.88/year. Their premium subscription fee also went up by $2 from $11.99 to $13.99/month, for a total cost of $167.88/year.
These price increases from the original pricing was very understandable. A few years after introducing the original tiers, Netflix also began creating their own content. Realistically, when business costs increase, companies have no choice but to pass those increased expenses onto the customer if they plan to maintain the quality of their content and wish to continue creating original content. While many people were upset with Netflix raising their prices, what they failed to understand was that in order to survive in this competitive marketplace, Netflix had to start creating their own content. That required hiring actors and producing and directing shows people would want to watch. I believe that justified a price increase in 2017, based on their rising production and business costs. Keep in mind, commercial free shows require customers ultimately pay for the cost of their production rather than advertisers.
This year Netflix’s price increase affects all three of its tiers. Their basic subscription price will increase by $1.00 to $8.99/month, driving up its yearly cost to $107.88/year. The 2nd tier (standard subscription, HD service) will also increase by another $1.00 to $11.99/month or $143.88/year. Their premium tier went up another $2.00/month to $15.99/month or $191.88/year. These price increases may be justified, as Netflix further increases its original content and as its production costs for its shows grow. However, Netflix also has a growing customer base (50-70 million) and enjoys a growing profit base ($15 billion/yr). One assumes a much larger subscriber base would negate the need for an additional price increase (greater than inflation) so soon after their last one. Indeed, as Netflix reaches market saturation and fewer new viewers are added to its base of subscribers, will its prices increase even more frequently and by a larger percentage?
Two price increases in 2 years is a bit much, and I believe that after Netflix made this decision it could have at least offered subscribers the choice to buy a yearly subscription to Netflix at a discounted price. Let’s say you only want the basic subscription which has no HD included with it and are paying $8.99/month after this increase. Netflix should consider giving you the option of a yearly subscription fee at a price of 11 months ($98.99/year), so you get one month free a year. I believe giving subscribers this option for all 3 tiers would benefit Netflix. In my opinion this option would gain them more subscribers. By hiking prices by too much and too often, Netflix runs the risk of losing subscribers, particularly if this business approach serves as their primary mechanism for enhanced profitability.
You can keep your Netflix account. This post is only to inform about what I thought about Netflix raising its prices again. I am on the outside looking in, as I don’t have a current Netflix subscription. I just wanted to provide my thoughts and opinion about Netflix. Netflix is a business, and like all businesses it exists to make money. Netflix hasn’t done anything wrong by raising their price. I just believe companies need to fully consider the needs, limits and desires of their customers and not just their own interests.
I don’t know how much Netflix’s is paying for the ability to stream content from other movie studios such as Paramount or Universal. I don’t know how much it costs them to produce their own TV shows and movies. I only know their customer base is growing, their annual profits are increasing, and their price is going up faster than inflation. Maybe one should oppose the greed and avarice of businesses like Netflix, but I leave that to the individual. I hope this post has been informative and helps you decide, whether you want to continue your Netflix subscription or cancel. Maybe I even convinced some non-Netflix subscribers to subscribe to Netflix.
Regardless, thank you for reading.
Jason
