http://money.cnn.com/2014/04/21/technology/netflix-prices/index.html?iid=s_mpm
At $7.99 a month currently, Netflix's subscription price will be raised a few dollars within the next few months. CEO Reed Hastings has stated that if the company is to continue adding better content and more original content, the price increase will be absolutely necessary. In just the first three months of the year, 2.25 million people subscribed, increasing the domestic total to about 36 million. Netflix, while providing hundreds of shows and movies, has more recently found success with original programming such as House of Cards and Hemlock Grove. Made available at your fingertips, I personally would strongly suggest and promote subscribing to Netflix. It is essential for any college student. The increase in price will likely not affect the number of people already subscribed to Netflix, and will cause a relatively minor increase in revenue for the company.
Well, you are right that this product is relatively inelastic, and people will still subscribe. However, this will not be a small increase in profits. The increase in profits will be significant. This is an interesting article. In the long run economy, will firms adjust, and how much will they is always a question.
ReplyDeleteThe increase in prices has also been due to the rise in competition in buying license for Internet video programming. Netflix has been spending a lot to compete against TV channels.Thus, this rise in expenses is being paid through increase in subscription fee.
ReplyDeleteI'm interested to see if the price increase will actually occur. I heard this would happen a few months ago and never did. While Netflix is inelastic to many consumers, I would disagree in saying that it is relatively inelastic overall. I would not continue paying if prices increase as there are many substitutes for this product; however I believe I am the minority in this case. Netflix may become more desirable if the price increase because they will be able to afford more licenses for TV shows and movies.
ReplyDeleteThere are certainly a growing number of alternatives, as amazon on demand and hulu, as well as a growing number of others, can attest. But one might argue that they don't all provide the exact same service. What could be inelastic, when looking at netflix, is the provision of physical movies, some of which are not available to stream. So it would be useful to see if there is a substitute for physical rentals, and if not, whether that consumer base for netflix is the majority of those who would not switch.
ReplyDeleteI would not suggest getting Netflix for these services. If their prices are increasing, then it will be likely that this will discourage a certain number of consumers from buying their services. While they claim to be offering better services, I have personally never seen the quality of my services increase. Therefore, I have switched to using a service offered by Dish Network, in which I can view TV shows and movies online without having to pay for the questionable services of Netflix and receive better service elsewhere. In a bigger context, it is likely that other consumers will demand these similar services from other companies, as competition as been increasing. I agree with Sara that this increase in the number of alternatives will have various impacts on Netflix's consumer base, as more people may switch in the future.
ReplyDeleteI often hear many people complain about the selection on Netflix, but I'd argue it's the best entertainment value you can for eight bucks a month. The movie choices isn't great, but there's a ton of TV show to choose from. When they raise prices people may complain, but I believe they will still keep their subscriptions because nobody is offering anything better for anything close to that price. I'd be happy to see them double prices if it happened along with a big increase in available content.
ReplyDeleteI haven't been a subscriber of Netflix, but I think this is a very important industry and one that can be very profitable. Netflix needs to be careful to keep their customers happy, especially before competitors come in and offer a more appealing product. I agree that right now Netflix is inelastic to consumers and they will continue to pay this price increase if it is to be implemented.
ReplyDeleteNetflix is a luxury good if you bought it before you will find the money to continue to buy it. Redbox is not nearly the competition that people thought it would be due to the same slim selection of movies and the inconvenience of having to actually get off the couch to get the movie. I wonder what the price ceiling is for Netflix consumers.
ReplyDeleteNetflix is already very popular and many loyal customers to it. I do not think raising prices will hurt them at all.
ReplyDeleteThe past years increase in demand for viewing television via online over cable makes the price increase for Netflix to be inevitable and necessary. The change in the way we watch film has changed the way entertainment is produced and who produces entertainment. Less major picture filmmakers and producers creates more small or independent filmmakers and producers, and compensation and price should react accordingly.
ReplyDeleteNetflix has many loyal customers. I don't think increase the prices would hurt them at all. If they are increasing the quality of movies then it should not be a problem.
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