ACG Research

ACG Research
We focus on the Why before the What

Wednesday, July 13, 2011

Netflix Changing Its Pricing Bundles

What does it mean for the OTT market?

Netflix just changed its pricing bundle from $9.99 a month for one at a time DVD and streaming to $15.99. DVD only and streaming only services are still available for $7.99 each.

It is interesting to see the reaction in the technology press; some have opined that it is a sign that Netflix is facing major challenges. Until now, it has been making money based on a free ride from the telcos and favorable deals with the content owners. Given such a big increase in the price, they will stop growing so rapidly.

Another point of view is that Netflix basically goofed on pricing and priced too low. When compared to other options for watching movies, even with the price increase, Netflix, still beats the bricks and mortar video store and the premium channels or pay-per-view options from the cable company.

So despite some outcry from customers about the price increase, I do not see this as a sign of major structural challenge or that it will slow growth significantly. In the final analysis, $8 a month is still a bargain, especially when compared to other choices consumers have.

David Dines

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