Why Higher Fees Won’t Hurt Netflix

How will higher subscriber fees affect Netflix? Magid’s annual Media Futures study shows the importance of SVOD content, the dedication of the audience, and the increasing household penetration of internet-connected TVs – and a while it may cost more to watch Stranger Things, Orange Is the New Black, The Crown, as the streaming service just raised fees for new subscribers and is in the process of transitioning current HD customers to more expensive pricing, the price hike is unlikely to impact customer loyalty or cause subscribers to seek out other forms of content, says Jill Rosengard Hill, EVP at Magid. Here’s why:

• Netflix has a strong value proposition and has made it clear they are investing to develop and acquire more films and originals
• “Specific individual movies/TV/video series that I want to watch” is the most often cited reason for selecting an SVOD service, so investment in content is critical to Netflix
• Pay TV customers are familiar with annual increases from their cable operators, which were always attributed to rising programming costs and user experience enhancements
• This is the first increase in two years for Netflix, and it is likely they will follow a similar cadence for future increases
• Netflix assumes they have some price elasticity with current subscribers, and is unlikely to see a significant change in churn based on this price increase

See below for Magid research on SVOD subscribers.

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