Professor, students weigh in on Netflix price increases
Netflix, one of the biggest streaming platforms, is raising most of its prices by eight to 13 percent along with other changes to its streaming plans.
In August, Netflix decided to rollout its “Watch Free” feature, allowing people without a subscription to watch a select number of its original television shows and movies.
Then in October, Netflix replaced its free 30 day trials with its “Watch Free” feature.
In the next coming months, Netflix plans to raise its prices for its standard and premium streaming plans.
With the price hikes, the standard plan will increase from $14 to $15 a month, while the premium plan will jump from $18 to $20 a month. Meanwhile, Netflix’s most basic plan will remain at its price of $9 a month.
The increase comes from the result of government-imposed lockdowns. The lockdowns, an effect from the ongoing pandemic, increased membership on the streaming service as they gained 5.4 million customers worldwide this year.
However, with so many changes, many question whether Netflix will be able to stay afloat. Although they are a prominent streaming service in their market, Netflix faces stiff competition with other services, such as Hulu and Disney+, where subscription plans are lower.
Despite these fears, economic professor Dietrich Vollrath said that Netflix’s situation is more complicated than that.
“It would appear that Netflix believes that their subscribers have what we would call inelastic demand,” he said. “That is, it looks as if Netflix believes that their subscribers are not very sensitive to the price of the service.”
Vollrath explained that to understand how the increase in prices affects Netflix depends on what the company is assuming about their subscribers.
He noted that despite this, the combination of the streaming service’s popularity and growth might not result in it experiencing drastic monetary changes.
Therefore, the result of the inelastic demand would be the loss of a few customers while Netflix’s overall revenue will be higher.
“Is this risky? Who knows?” Vollrath said. “Yes, they face a lot of competitors and more appear on the horizon all the time. But perhaps Netflix doesn’t see things like Peacock or CBS as actual competitors anymore. That is, Netflix for a long time just distributed other people’s content for them, and in that case, these new services are close competitors.”
Despite providing content from its competitors, Vollrath acknowledged Netflix’s gradual change into a production company as they create original content such as Stranger Things and Tiger King. As a result, Netflix might be seeing themselves more aligned with the likes of HBO.
“So if they see themselves more like HBO in that sense, then they aren’t competing with Peacock and CBS so much,” he explained. “And since HBO gets away with charging $15 a month, so can Netflix?”
To that question, some UH students seem to agree. As a staple of entertainment for many college students, the increase in prices might cause them to explore subscriptions from Netflix’s competitors.
However, with students mainly using the basic plan, that might not be a big concern. In addition to using the basic plan, students also use other cost-efficient ways to watch Netflix. Some of those ways are through password sharing and having family members to cover the monthly fee.
Media production junior Lindsey Jimenez explains how the price jump isn’t causing her to look at other streaming services.
“I’m OK with the changes because everyone still has the option of the $9 subscription,” Jimenez said. “I also enjoy the original shows they produce, so I’m sticking with their basic plan.”
For those who don’t use the basic plan, the love of Netflix’s original content outweighs the problem of paying more, according to media production sophomore Comfort Abiodun.
As she shares a subscription with her family, Abiodun is understanding of the streaming service’s hike in prices due to their increasing demand for content. And despite the increase, Abiodun also said that Netflix will still survive regardless.
“I feel like no matter how many times Netflix raises their prices, they will still remain one of the best streaming platforms,” she said. “Most people, including me, have a subscription for other streaming platforms like Hulu, as well as Netflix. So it is unlikely for me to break away from Netflix any time soon.”