Netflix Faces 'Unexpected' Loss of Subscribers Due to Monthly Price Increase

[MacRumors]

Earlier this year, Netflix reminded its oldest users that the terms of its grandfathered pricing -- which kept these subscribers at the $7.99 level for two years -- would be coming to a close sometime in the second or third quarter of 2016.

In a recent letter to the company's investors, CEO Reed Hastings remarked on the unfortunate churn of its subscriber base who reacted "unexpectedly" to the impending price increase.

The loss of grandfathered pricing places these older users at a new $9.99/month charge for the company's popular streaming service, which Netflix sees as an agreeable compensation for its noticeable uptick in consistent, original programs like Orange is the New Black and House of Cards. These shows debuted in 2013, and the $9.99/month price for new subscribers began just the next year, in 2014. Users can choose to stay at $7.99/month if they wish, at the loss of HD video streaming.

Due to these abandoned users, the company's stock fell 15 percent before its second quarter earnings report, shared yesterday. In the report, Netflix noted that it expected to add about 532,000 subscribers in the United States and 2.10 million internationally in Q2 2016 (just under a 2.5 million goal), but came up short on both goals. The company ultimately netted 160,000 new customers in the U.S. and 1.52 million overseas, landing under 1.7 million total in the quarter.

"Gross additions were on target, but churn ticked up slightly and unexpectedly, coincident with the press coverage in early April of our plan to un-­grandfather longer tenured members and remained elevated through the quarter," said Netflix CEO Reed Hastings in a letter to investors. "We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering."

As the price hike began to near in the spring, Hastings admitted that users googling and researching the increase in their subscription cost appears to be consistent with the churn the company has seen this quarter. Despite Netflix's increase in programming, "Whatever the price is for something, people don't like for it to go up," Hastings admitted, while still claiming that the new price tiers are "working great" for new members.

Article Link: Netflix Faces 'Unexpected' Loss of Subscribers Due to Monthly Price Increase

 

[OldSchoolMacGuy]

Who outside Netflix didn't see this coming?

The competition is growing and haven't been raising their rates each year as Netflix has.

While Netflix has put a huge push behind original shows, they've ignored the other side, the people that want shows and movies found on network TV which they'd originally gotten the service to watch. This area has been pushed away while Netflix seems to focus only on the few original shows they're trying to shove down everyone's throats.

 

[logicstudiouser]

'Unexpected', really?

When you increase the price without adding more value, what did you think was going to happen?
Also, the tiered pricing for quality is a turn off for a lot of people.

 

[nikicampos]

'Unexpected', really?

When you increase the price without adding more value, what did you think was going to happen?
Also, the tiered pricing for quality is a turn off for a lot of people.

Came here to say exactly this, "Unexpected"???

I don't know if Netflix didn't expected to lose some clients or this is just a poor choice of title from MacRumors, neither would surprise me.

 

[DogHouseDub]

they'll all come back. What else are you going to get for $9.99 a month that even comes close to Netflix?

 

[keysofanxiety]

Funny how when companies announce things like this, most people on websites such as the humble MacRumors home predict exactly what detrimental effect will occur as a result.

Gives a friendly reminder just how out of touch the bean counters at the top really are.

 

[Dydegu]

They push a massive amount of original programming and I'm still able to binge Lost and Breaking Bad. They've also had a really awesome amount of stand up comedy specials and exclusives. An extra two bucks is well worth it. Spotify is $10 for premium, and I think what Netflix offers is even more valuable.

 

[bradkrischel]

“We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering.”

Just because you tell someone a price increase is coming ahead of time doesn't mean it's not a price increase

 

[JWreck]

I'm not sure I agree with everyone's negative opinions on this. I've had Netflix for nearly a decade and can't recall more than 2 price increases? Even if it's more, over that span of time, it seems fair. They're turning into an HBO with programming coming up to match that of HBO and HBO is more expensive still.

 

[John Mcgregor]

Price is not the issue get real people. The issue is content being not the same everywhere.

 

[sportsfan]

Maybe create a tier with no access to the Original Content? This is the start of a "QVC" type channel bundling... they type of thing cord cutters are trying to get away from.

 

[iansumuk]

they'll all come back. What else are you going to get for $9.99 a month that even comes close to Netflix?

I don't know if it exists outside of the UK but NOW TV seems pretty good value, I'm on a free trial at the moment via the Apple TV.

 

[Xavier]

Why can't you search by genre on the ATV4?

 

[dotnet]

they'll all come back. What else are you going to get for $9.99 a month that even comes close to Netflix?

Stan.

 

[Dilster3k]

Why is 2 bucks such a big deal? Some people are overdoing it and being spoiled, 10 bucks alone per month for a service like that is very remarkable. There used to be a time not too long ago where we paid that same amount for 1 to 2 DVDs.

 

[joueboy]

This makes look like Amazon is a deal breaker for $99 a year. It would probably reasonable if they didn't lost some of the tv shows we watch. I will probably going to cancel my account too. Too much subscription for me already and seems like it never ends. I hate the direction we're heading to.

 

[sransari]

Why is 2 bucks such a big deal? Some people are overdoing it and being spoiled, 10 bucks alone per month for a service like that is very remarkable. There used to be a time not too long ago where we paid that same amount for 1 to 2 DVDs.

I think it triggered ppl to reconsider whether they even need the service all together even for the old $7.99/m price. When people are on monthly subscriptions they usually just keep it running without a thought, but when they get notice of a price increase...well, that gets them thinking.

 

[psylence2k]

Who outside Netflix didn't see this coming?

The competition is growing and haven't been raising their rates each year as Netflix has.

While Netflix has put a huge push behind original shows, they've ignored the other side, the people that want shows and movies found on network TV which they'd originally gotten the service to watch. This area has been pushed away while Netflix seems to focus only on the few original shows they're trying to shove down everyone's throats.

What competition has close to the selection Netflix has at a lower price though ?

Hulu with no ads is $12 and HBO GO is $15.

Original programming is a huge part of Netflix's success and the reason why they're able to offer something of high demand at their current price.

If you wanted them to do that AND go after all the hottest releases on TV and film then the price would be much higher driving away more people.

If you really prefer the latest network TV and movies why dont you get something like Hulu or Netflix DVD ? I really dont see why you would need to worry about Netflix when there's options that fit what you're describing.

 

[_mdavenport]

Alternative headline: Netflix CEO Surprised at Basic Economic Principles 0_0

 

[AppleHater]

Charging even more extra for 4K contents gives me the impression of them milking their subs.

 

[Gruntersdad12]

I can get Amazon Prime for 99.00 for the year. This includes music and 2 day shipping on most products. Netflix, is silly to use their Original movies as a selling point since most in my opinion is mostly garbage. 12 months at at 10.00 plus tax and fees is not a good deal. I will be switching as soon as the cat in my account has been depleted. Adios Netflix.

 

[jbachandouris]

I barely use Netflix as it is. I was planning to cancel, but the wife claims the kids watch it even though I've never seen them.

I liked Jessica Jones and kinda like Daredevil, but not $9.99 like.

 

[2010mini]

Price is not the issue get real people. The issue is content being not the same everywhere.

Netflix has NO control over that. This is why they are pushing further in original content. It is also why other streaming sites are all doing the same.

With all their quality original programming, $10 a month is a steal

 

[69Mustang]

At $8 or $10, Netflix is still a great value. I can't really understand the angst over spending 2 extra dollars considering all the extra content Netflix is providing. Original programming and continual licensing fees (which have increased) cost money. I guess it boils down to a value prop. Those who don't think it's valuable enough for an increase can always keep their $8 subscription.

Personally, I think it was dumb of Netflix to have the two year notification. The same people who balked at the original notice are going to be the same people who balk two years later. They should have given standard notice like any other company, taken their lumps (the same lumps they're taking now), and moved on. By now it would be a none issue.

 

[AppleHater]

I think it triggered ppl to reconsider whether they even need the service all together even for the old $7.99/m price. When people are on monthly subscriptions they usually just keep it running without a thought, but when they get notice of a price increase...well, that gets them thinking.

Very good point. It only caught my attention when the price changed. How much doesn't matter. Any subscription model relies on people signing up and forget about it.