Netflix price increases may be too much for some

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Streaming video subscribers are price sensitive – sensitive enough that Netflix's price increases may result in some defections.

According to a recent survey conducted by The Diffusion Group, 16% of Netflix subscribers may switch to a lower plan or cancel the service.

The widely popular broadband subscriber service, which has more than 138 million subscribers worldwide, announced Tuesday an increase in rates for new subscribers, with current subscribers receiving higher monthly rates over the next three months. next few months.

The most popular Netflix package, which cost $ 10.99 per month for two HD streams, will now cost $ 12.99. The base package at $ 7.99 non-HD will now be $ 8.99, while the Premium package for four simultaneous 4K streams increases from $ 2 to $ 15.99 per month.

Last month, the Broadcast group surveyed nearly 1,300 broadband subscribers of adult broadband users about potential price increases, dividing them into three different groups and asking for monthly increases of $ 1, $ 3, or $ 5. .

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The vast majority of people surveyed about an increase of $ 1 (84%) said they would pay the extra cost and continue to use Netflix. But 8% said that they would switch to a less expensive plan, while 8% said that they would probably cancel (but certainly not) the service.

Faced with a price increase of $ 3 a month, about two-thirds (62%) indicated that they would stay with Netflix, but 22% said they would switch to a cheaper plan and 16% canceled the service. Within this group, one-third (33%) of those currently subscribing to the most popular $ 10.99 plan said they would likely lower their subscription. Ten percent of subscribers at $ 10.99 said that they would probably cancel the service, the research firm said.

Premium plan subscribers were less likely to downgrade or leave, he revealed, with 28% stating that they would switch to a less expensive plan and 6% likely to cancel.

With an increase of $ 5 a month, others might cancel or downgrade.

Although the survey does not specifically ask for a price increase of $ 2 – according to the most popular plan and premium plan – responses to a price increase of $ 1 and $ 3 "give you a good idea" of the reaction likely consumer, president of The Diffusion Group. Michael Greeson said in the US TODAY'S HUI.

"Although (the research firm) thinks that Netflix will withstand any short-term reaction to these increases, it undoubtedly reaches a level of price resistance at all levels," he said in a statement. a statement accompanying the results of the investigation.

Similar results came from a survey conducted Wednesday by the website Streaming Observer and Mindset Analytics. Nearly a quarter (24%) of Netflix's 607 US Netflix adult subscribers who participated in the online survey said they could "cancel out" Netflix above higher prices. Three percent said they were certain to permanently cancel Netflix. Most subscribers (63%), however, indicated that they would stay with the service.

The survey found that most Netflix subscribers (61%) had heard about rising prices. Two-thirds (65%) said they would consider a free or free version of Netflix with ads.

"In the past, many Netflix users categorically asserted that they would never tolerate ads on the streaming service," said site founder and editor, Chris Brantner, in the results of the survey. ;investigation. "However, most subscribers have grown reconsider."

The price is even more important than the content, said Limelight Networks, a provider of digital content, in its report on the state of online video, based on a survey of 5,000 consumers worldwide. Sixty-two percent of US consumers said that price was the main reason they canceled a streaming service, while 21% said poor quality content would be the main reason for cancellation. .

"To remain competitive in an increasingly crowded streaming market, Netflix needs to retain current subscribers while winning new viewers," said Mike Milligan, Senior Director, Limelight. "However, their new price hike may not be the best strategy because consumers are more price sensitive than ever before."

According to Michael Pachter, analyst at Wedbush Securities, new subscribers are more likely to be influenced by price increases than current ones. Indeed, Netflix's future growth will come from median income and households with lower median incomes, he said in a note to investors Wednesday.

"We do not anticipate weight loss given the utility provided by existing subscriber service, but attracting new subscribers will likely be more difficult because of higher prices," he wrote.

With a wave of new streaming services being prepared at Disney, WarnerMedia's AT & T and NBCUniversal, it's likely that Netflix's competitors are taking note of subscribers' reaction.

Netflix announces its subscriber additions in the fourth quarter Thursday after the stock market closes.

"Netflix is ​​the most popular service (Streaming Video on Demand) and has the most loyal subscribers," Greeson said. "As such, if it encounters resistance to these price levels, others will undoubtedly do so as well."

Follow Mike Snider, journalist at USA TODAY, on Twitter: @MikeSnider.