The first time Netflix tried a price hike, its customers revolted, causing the company to rethink the idea. Recently, Netflix announced a rate increase, and tens of millions of fans barely blinked. Check that… more than 125 million subscribers shrugged. The streaming media company recently crested that milestone, and it looks to be climbing faster than ever.
According to recent reports, Netflix added more than 7 million subscribers in the first quarter of 2018, 50 percent more than they added in the first quarter of 2017. The increase has investors excited and other streaming companies scrambling to find a way to compete. Where once Netflix was vulnerable, depending almost entirely on content from other providers, some of the most popular Netflix properties these days are original programs. In that successful first quarter, Netflix released 18 original series, 11 new seasons of existing content, as well as 14 new movies. And that has CEO David Wells excited. CNN reports Wells telling analysts, “The business has grown faster than we expected… We outperformed in a way we didn’t expect…”
One of the reasons the success is “unexpected” comes from faster than expected growth overseas. Of the 7.4 million new subscribers, more than 5 million signed up outside the U.S., a smashing success for the company, especially in markets that had been considered big risks. So, what’s next for Netflix? More entertainment. The company has no interest, at least for now, in moving into the news sector. Likely a smart decision. The market is flooded, and the competition in that market is fierce, especially when so many traditional news outlets are struggling to find ways to stay profitable in an internet world. With all those complications, there’s no need for Netflix to move beyond what’s currently making it so successful, at least for now.
That’s not to say Netflix will only focus on original content. The company is still investing heavily in streaming content from other creators. In fact, news reports put that number somewhere around $18 billion in content deals, nearly 3 billion more than the previous year. And that brings us back to the rate hike. Netflix had to cover the cost of increased licensing fees and higher production costs. That necessitated more cash from subscribers. Prices went up about ten percent, an amount most subscribers hardly noticed, because Netflix is still offering much more than about ten bucks a month in value.
As long as Netflix continues to offer that kind of value for their money, customers will continue to pay… and they will continue to wonder if cutting the cord to cable makes more sense.
Ronn Torossian is the CEO of 5W Public Relations