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Does Netflix Have Room to Hike Prices?

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May. 31 2019, Published 11:52 a.m. ET

Netflix has seen tremendous subscriber growth in the last two quarters

Netflix (NFLX) has been able to attract millions of subscribers every quarter, as it’s been offering its services at a very low price. The streaming giant has been able to add a whopping 18.4 million paid subscribers globally over the last two quarters.

The company doesn’t expect to add as many subscribers in the next two quarters, but it already has ~149 million paid subscribers globally. It has been able to attract many subscribers outside the United States by hiring local producers and actors.

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However, the company can’t offer the same rates forever. The streaming giant has burnt through cash to spend aggressively on original content. It’s slowly increased its subscription rates in the United States and some other markets. The company is reportedly increasing its rates in the United Kingdom as well.

Netflix still has much more room to hike rates, especially internationally

Netflix may be able to hike its rates further without much churn, as its subscription rate is still much lower than an average cable bundle, which can cost ~$100 per month. Even if a viewer has three over-the-top subscriptions, he or she is likely to keep Netflix—even after a hike—given the quality of its library of original programming, which is unparalleled.

Netflix is almost indispensable for the majority of Americans. The company is also becoming very popular in markets such as India and Brazil, where its price is still extremely low. Even if subscriber growth plateaus in the coming years, the company can grow its revenue by hiking its price.

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