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Price-Conscious Consumers Are a Challenge for Netflix

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Netflix’s pricing strategy

Netflix (NFLX) has kept its international prices close to its US prices. The company’s streaming service in international markets costs between $6 and $19 per month. However, Netflix was asked about its premium pricing strategy in international territories at the Goldman Sachs Communacopia conference last month.

Early this year, Netflix expanded to around 130 countries. As the company expands rapidly to international markets, it expects to grow in these markets over a multiyear period. Netflix stated that since it’s still in the initial growth stage in these countries, it believes there are many people who will be willing to pay that price.

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The company further stated that as it penetrates more into these international territories and has to contend with households with various income levels, it could consider introducing various price tiers in international markets. However, Netflix ruled out introducing an ad-supported offering in these markets since it believes the Netflix brand doesn’t stand for advertising.

As you can see in the above graph, Netflix had total streaming memberships of 83.2 million in fiscal 2Q16. The company expects total streaming memberships of 85.5 million in fiscal 3Q16.

Netflix’s plan to woo price-conscious viewers

In Asian markets, where Netflix launched early this year, Netflix is providing a high-value service at around the $10 price point. It’s also offering viewers plans at various price tiers. This approach means that price-conscious viewers in Asia can choose the lower-priced plan, and Netflix won’t lose viewers.

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