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Netflix CEO says they’re not on a ‘price-first basis’

  • Netflix will not be increasing its prices unless it has earned it.
  • The shares, revenues, net income and even subscribers have all increased drastically. 

Netflix is doing really well in every aspect recently. To begin with, the shares of the company has vastly increased by over 22% in the past three months. The company’s net income went from $178 million to $290 million. Staying true to its forecasts, its revenue has increased by 43% to $3.6 billion.

Netflix is definitely one of the most successful video streaming services that have ever been produced. This is apparent from the increase in the number of premium subscribers following an increase in its monthly fee in the fourth quarter of 2017.

The company’s executives have reassured its customers of its policy on price changes on Monday. They inform that the monthly fee of its most popular subscription plan will no doubt inflate in the future. Nonetheless, that stands true to any services. However, consumers should not concern themselves over it as it will not be happening anytime soon. They reiterate their mantra of only asking for what they deserve. This means that the prices will only go up if they find it within themselves to provide better content to the users.

Reed Hastings is the Chief Executive Officer of Netflix who has confirmed this during an interview on Monday, as reported by USA Today. The interview was with Ben Swinburne, the head of media research of Morgan Stanley.

“You have to earn it first by doing spectacular content that everybody wants to see.”

He credits the success of the company to this system. Hastings proceeded to explain the underlying mechanism of this approach.

“But if you do that, you can get people to pay a little bit more because then we are able to invest more and further improve. But we always approach it on a ‘have we earned more viewing for people’ basis first, rather than a price-first basis.”

He says that the first step of this approach is to get users to willingly give the service a chance. Subsequently, they will see that the service is in fact, living up to its name. Netflix allows consumers to feel well-informed and that the service is worth the money. This will help to establish a loyal customer base.

The current monthly price of Netflix’s most popular plan is $10.99 whereas the $13.99 plan gives you more options (up to 4000 videos). Like any goods or services, the price of the commodity ultimately depends on its quality in a juxtaposition with its competitions in the market. Hastings sums this up as follows.

“The consumer has a lot of entertainment options. Whether our share of that grows or shrinks is really up to do we produce great content, market it well, serve it up beautifully and if we do that really well, if we earn more of consumers’ time, then we continue to grow. If we get lazy or slow, we will get run over like anyone else.”

There are as many as 200 or more video streaming alternatives for consumers at the moment. That number is increasing at a quick pace as we speak. While some may not hold as much weight as Netflix or Hulu – thus decreases the significance of the competition – other brands that are as established and perhaps more longstanding than Netflix are also in motion. Take Disney for instance. The company has initialized its plan to stream its own productions and will implement the plan by the final quarter of 2019.

In this past quarter, Netflix has reached an impressive 125 million subscribers in total. There was an increase of 1.96 million American subscribers on top of 7.41 million worldwide. This means that the company has far surpassed the Wall Street forecasts – as well as their own – of 6.35 million.

With an increased aggregate revenue, Hastings tells us the company’s plan in the allocation of resources.

“We are continuing to invest in content, marketing, product, all the things we’ve been doing. Just the breadth of content we have got going is really remarkable.”

This is clearly the case since users are now subscribing to catch the latest episodes of many Netflix production. Some of which include Santa Clarita diet, A Series of Unfortunate Events, Grace and Frankie, Marvel’s Jessica Jones as well as Altered Carbon, the new science fiction.

On top of all, during the interview, Hastings had also addressed concerns regarding the security of users’ private data because of the recent commotion with Facebook.

“I’m very glad we built Netflix not to be ad-supported, but subscription.”

Hastings clarifies that this is not an issue since Netflix is not involved in the consumer-producer advertisement link.

“I think we are substantially inoculated from the other issues that are happening in the industry.”

Indeed, Netflix does not work in the same way as the majority of these technology-focused firms. It is a simple monthly subscription in exchange for access to videos. This is the reason why it is and will remain to be the consumers’ choice.

Featured image via flickr/ Başak

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