Netflix adds new customers despite its price hike
Netflix (NFLX) is working its way through a series of price increases in several markets, including the United States and parts of Europe. At the start of the year, for instance, Netflix reviewed its prices for US customers. The price of its most popular plan jumped 18% to $13 per month from $11 per month.
A survey from Diffusion Group came out shortly after Netflix announced the price hike and was cited by USA Today said that as many as 16% of Netflix customers could cancel their subscriptions because of the price increase. In an apparent attempt to capitalize on the expected fallout from the Netflix price hike, Hulu dropped prices for its on-demand video plans, and Dish Network (DISH) launched a discount promotion for its Sling TV service. Hulu is owned 60% by Walt Disney (DIS) and 30% by Comcast (CMCSA).
But Netflix actually added 1.7 million paying subscribers in the United States in the first quarter.
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Netflix wants customers to fund a programming budget
Netflix admits that it lost some customers due to recent price increases in the United States, but it says that the response to the price changes is, so far, consistent with its expectations.
That Netflix continues to add new customers even after hiking prices suggests a company with customers who are not only highly loyal but also supportive of its business strategy. Netflix has been borrowing to bankroll its expensive content budget, but it wants to rely on its customers to foot the programming bills. The company has been asking customers to pay more for the service to allow it to raise funds to spend on more content production. To set itself apart from the competition, Netflix has taken to making original shows and movies that are exclusively available through its platform. Amazon (AMZN) follows a similar playbook to drive uptake of its Prime Video service.