One would expect the stock price to have a solid day investors tend to purchase stocks at high volumes when they hear positive news about the company. This is the first time a Netflix movie has been nominated for such an award. This is surprising news considering that it comes on the same day that one of their original films, “Roma”, was nominated for an Oscar award for best picture. Most recently, on January 22, 2019, Netflix experienced a 5% decline in their stock. Top investment companies such as Goldman Sachs, RBC, and Credit Suisse all see the news as a positive as they signal buy ratings to the stock. Their rate increase pace of 16-18 months has been maintained, which is historically important to investors as they like stability and consistency (Salinas). In the past, the price increases proved to be a positive influence on the stock performance, as it demonstrated Netflix’s confidence that their subscribers would remain despite the increase. In 2019, the stock has already risen over 20% and continues to climb. The day the company announced the subscription cost hike, their stock rose 6.5%. After a strong 2018 campaign that propelled Netflix to perform best out of the FAANG stocks, 2019 has kicked off to a hot start for the company. Once news came out that the company would be implementing the price increase, the stock immediately sprang upward. These same numbers predicted that although an increase in price would result in a loss of subscribers, the increased revenue would more than offset the loss of subscriptions on the bottom line. The Streaming Observer website also ran a poll and those results indicated that 24% of Netflix users would consider canceling if there was an increase in the monthly rates. These percentages rose as the predicted monthly rate increases grew. Approximately 16% of users claim that if this price jump was implemented, they would cancel their plans (Snider). The Diffusion Group recently conducted a survey of adults to predict what percent of users were likely to cancel their subscriptions if the price of usage increased $1 per month. The increased revenue should allow Netflix to create better programming and combat the challenges from these respective competitors. Disney, Apple, and NBCUniversal have all announced that they will be getting into the streaming business which will provide added competition to Netflix. ![]() Many of their top shows offer new episodes each week which in turn, keep the viewer engaged. Netflix has a reputation of pumping out shows at a frequent rate, and they feel the more they invest into creating new shows, the easier it will be to justify the price increases. Over $8 billion were used to help create the shows that Netflix put out in 2018 (Pallotta). It is important to note that they still cost less than HBO Now’s $14.99 monthly charge.Ĭompetition and increasing production costs were the reasons driving the price increase. When asked about the increase, media analyst Rich Greenfield stated that as long as Netflix continues to provide content that interests viewers, the price increase will not affect subscriptions. ![]() Previously, they had increased rates of specific plans one at a time. There have been three price hikes prior to this increase, but this is the first time that the company will be increasing the rates for all its plans simultaneously. This would make it the largest price hike since the company’s inception in 2007 (Seigal). Disney is a unique case because the company will remove most of its content from Netflix so it can live on its own streaming service instead.On January 15, 2019, Netflix announced that it would be increasing monthly subscription costs of its three plans by as much as 18%. There's also the threat of newcomers- Apple, AT&T, and Disney are all slated to introduce their own TV streaming services this year. Doing so will help it compete better with existing rivals like Amazon Prime Video and Hulu. Clearly, Netflix sees its original content-shows like Stranger Things, Orange is the New Black, and The Crown as well as movies like Bird Box-as the lifeblood of the service, and it wants to continue to invest heavily in it. In recent years, Netflix has spent billions each year to produce original content and acquire the rights for existing content. That's always a threat with a price hike, but Netflix is likely hoping that the promise of more (and better) original content will keep customers around. While all Netflix users will spend just a few dollars more per month, that may be enough to prompt some to cancel their subscriptions. ![]() "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," a Netflix spokesperson told The Wall Street Journal.
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