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Diffusion: Netflix price increase will test SVOD ceiling

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New research from The Diffusion Group suggests Netflix’s current round of price increases may have significant implications.

It says that with an increase of $1 or more per month, some 16% of Netflix subscribers are likely to downgrade, or cancel their subscription altogether.

The data comes from Quantum Viewing Behavior, a survey of 1,940 US adult broadband users completed in December 2018.

On Monday, Netflix announced its Basic, Standard and Premium plans will all rise by between one and two dollars.
Anticipating an increase in 2019, in December 2018 TDG tested price sensitivity toward monthly Netflix cost increases. Top-line results are featured below.
As part of its study, Netflix subscribers were split into three exclusive groups, with each asked of their likely intentions should the cost of service increase by either $1, $3, or $5 per month. Each respondent answered for only one random price assignment.

An an increase of $1 per month, 8% of Netflix subscribers say they would downgrade their plan, with 8% saying they would cancel service altogether. At an increase of $3 per month, the rate of likely cancellations doubled, while the rate of likely downgrades nearly tripled. At an increase of $5 per month, the rate of likely cancellation increased another six points (38%), while the rate of likely downgrade increased only three points (17%).

“While TDG believes that Netflix will endure any short-term backlash from these increases, it is undoubtedly reaching a level of price resistance across all tiers,” notes Michael Greeson, President of TDG. “At an average increase of $3 per month, 33% of Standard tier subscribers are likely (though not certain) to downgrade to a less expensive plan and 10% are likely to cancel the service altogether, compared with 28% and 6% of Premium tier subscribers, respectively. These variances are not insignificant.”

Greeson adds that other SVOD providers should pay close attention to these results, as they set a benchmark for the entire SVOD market space. “Netflix is the most highly valued SVOD service and enjoys the most loyal subscribers. As such, if it encounters resistance at these pricing levels, undoubtedly others will, as well.”



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