Netflix Reduces Prices to Boost Subscriptions
Netflix Inc. said on Thursday it had reduced the prices of its subscription plans in some countries, as the streaming giant looks to retain subscribers growth amid stiff competition from rivals across the world.
With the pandemic-fueled boom cooling and consumers turning more cautious about spending, competition in the streaming businesses has heightened, pushing the companies to rethink their strategies.
There is pressure on subscription sales in the Africa market on account of weakening local currencies. According to the Wall Street Journal, which reported the Netflix news first earlier in the day, the price cuts span across some Middle Eastern countries, sub-Saharan African markets and parts of Latin America and Asia.
The cuts apply to certain tiers of Netflix in those markets and in some cases halve the cost of a subscription, the Journal reported.
Netflix, which operates in over 190 countries, has been looking to grow its share in newer international regions as the U.S. and Canada markets saturate. Earlier this month, it laid out plans to crack down on password sharing for accounts on its streaming platform.
“We’re always exploring ways to improve our members’ experience. We can confirm that we are updating the pricing of our plans in certain countries,” a spokesperson for the company said.
JP Morgan Reacts to Price Cut
Netflix is among the day’s top decliners in media, with the stock down 4% – apparently at least in part due to news that the company has dialled back its prices in dozens of markets – a development that has J.P. Morgan said “We’d buy the pullback.”
The streaming pioneer is reducing prices on certain tiers in markets ranging across the Middle East, sub-Saharan Africa, Eastern Europe, Latin America and parts of Asia.
Those cuts “appear concentrated toward markets where the company is still in the early innings of service adoption,” KeyBanc analyst Justin Patterson says, estimating the cuts land for about 6-10% of subscribers.
That makes it “likely immaterial to revenue,” Patterson said, given the small size of the markets and the fact that Netflix likely had the cuts in the works when it issued guidance. Lower average revenue per user from those regions will likely be offset by improved retention and possibly new subscribers, he noted.
“Bigger picture, Netflix appears to be balancing both sides of its subscriber bases, by making the service more cost-effective in nascent markets and taking monetization actions (whether through paid sharing, ads, or price increases) in mature markets,” Patterson said.
The new cuts appear to follow Netflix’s path in India, where it cut prices in December 2021 to maximize potential, J.P. Morgan analyst Doug Anmuth noted.
# Netflix Slashed Prices to Boost Subscriptions