Netflix CEO Hints At How He Hopes To Get People To Pay More
With HBO successfully charging $15/month for a streaming service and the $11/month sticker price for Showtime’s new online offering, why does Netflix continue to charge as little as $8/month without running ads like Hulu does (for the same rate) or without the huge online retail business to back it like Amazon Prime?
In a call to discuss Netflix’s quarterly earnings, CEO Reed Hastings explained that the current idea is to continue offering a reasonably low starter rate and give customers a reason to eventually climb up that pricing ladder.
Hastings acknowledged that the entry-level $8/month rate — which is just for standard definition video and only allows one stream at a time — is low but believes that “The affordability is propelling growth.”
For $1/month extra, users get access to up to two streams and HD content. The highest price level of service from Netflix is currently $12/month, giving users up to four simultaneous streams and the option of watching Ultra HD content (provided they have the right TV and a decent enough Internet connection).
Hastings said the goal is to motivate customers to inch up to the higher levels.
“We’re going to continue to have incentives to have people move up in the plans as suits their usage pattern,” he explained, implying that customers are likely to see more pricing options in the future.
There are no planned rate increases in the U.S. in the next quarter and Hastings gave no indication that the company is in a rush to institute an across-the-board price hike.
“We want to take it very slow,” said Hastings. “Things are going well. There’s no need to be disruptive… It’s really focused on going very steady, very slow, and over the next decade I think we’ll be able to have more and more content and add more value and then to be able to price that appropriately.”
Hastings seemed to shrug off the idea of testing other pricing models.
“The way that we’ve chosen is working very well for us,” said the CEO. “The structure on the price tiering is unlikely to change.”
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