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A new study from Tivo-owned technology company Digitalsmiths gives insights into Netflix’s pricing power and the strengths of the subscription video on-demand (SVOD) platform in the eyes of consumer.
Netflix’s subscriber growth disappointed in Q2 2016, and the company attributed this underperformance to the $2 price increase from $7.99 t0 $9.99 for its service and associated media coverage around this price hike.Digitalsmiths’ survey was posed to 3,114 respondents in the US, aged 18 and above.
Netflix’s most appealing features for consumers are price (58.9%), the ability to create custom profiles in a single account (55.1%), and its search functionalities (49%). The amount of respondents listing price as an appealing feature decreased by almost 4% since last year, which is not surprising given Netflix’s price hike.
On the other hand, the ability to create multiple profiles (enabling multiple users to use a single subscription) increased by over 2%. Taking these two movements together – price as an appealing feature going down, and custom profiles as an appealing feature going up – helps illustrate consumers' aversion to higher subscription prices.
Finding out just how much consumers would be willing to pay for Netflix is thus a valuable question. Nearly 30% of respondents are not willing to pay more than Netflix's price. About 40%, meanwhile, would acquiesce to an additional $2 to $5 hike from the current $9.99 monthly rate. This constitutes the largest segment of the survey’s population, demonstrating that Netflix still retains strong pricing power, despite the lackluster Q2 2016 performance.
As we move into more expensive price ranges, however, consumers become increasingly unwilling to spend for a subscription, suggesting that Netflix should not venture beyond the $15-a-month threshold.
Over the last few years, there’s been much talk about the “death of TV.” However, television is not dying so much as it's evolving: extending beyond the traditional television screen and broadening to include programming from new sources accessed in new ways.
It's strikingly evident that more consumers are shifting their media time away from live TV, while opting for services that allow them to watch what they want, when they want. Indeed, we are seeing a migration toward original digital video such as YouTube Originals, SVOD services such as Netflix, and live streaming on social platforms.
However, not all is lost for legacy media companies. Amid this rapidly shifting TV landscape, traditional media companies are making moves across a number of different fronts — trying out new distribution channels, creating new types of programming aimed at a mobile-first audience, and partnering with innovate digital media companies. In addition, cable providers have begun offering alternatives for consumers who may no longer be willing to pay for a full TV package.
Dylan Mortensen, senior research analyst for BI Intelligence, has compiled a detailed report on the future of TV that looks at how TV viewer, subscriber, and advertising trends are shifting, and where and what audiences are watching as they turn away from traditional TV.
Here are some key points from the report:
In full, the report:
Interested in getting the full report? Here are two ways to access it: