There were plenty of opinions last week at RetailWire on the subject of Netflix. The company announced that new members will need to pay 8.99 or 9.99 per month, but existing members will be “grandfathered” at the current rate of 7.99 for its streaming service. I took a contrarian point of view, because I feel this is a way for Netflix to test the limits of existing customers’ price resistance, too:
The price increase for new members is the “canary in the coal mine” for Netflix. They should be able to measure price resistance at 8.99 or 9.99 per month, in order to decide when and how fast to raise subscription rates on existing members. It’s only a matter of time.
It’s hard for Netflix to maintain pricing while committing to improving the product. Netflix needs to pay carriers like Comcast for higher speeds, it wants to develop more original programming, and it needs to make its movie catalog more competitive with Amazon and Apple. (Right now, the movie selection is awful.) The only realistic way to do this, and to maintain margins, is to raise prices in increments.