Netflix says it’s testing price hikes — but not surge pricing
Could Netflix eventually charge surge pricing?
That remains to be seen, even though some news media have reported the streaming subscription video service is already testing the potential in Australia.
Several outlets including Buzzfeed and The Australian Business
Review reported over the past weekend that some Netflix visitors found slightly higher monthly prices across its various tiers, the reports said.
Netflix is conducting some price testing, but the reports that these amount to tests of so-called “surge” pricing during higher-use time periods were incorrect, says Jonathan Freedland, Netflix’s chief communications officer.
Netflix does price testing in many countries, he said, and provided a statement from the streaming TV provider: “We continuously test new things at Netflix, and these tests typically vary in length of time. In this case, we are testing slightly different price points to better understand how consumers value Netflix. Not everyone will see this test, and we may not ever offer it generally.”
It makes sense that Netflix would at least consider price increases of some sort because “it has to,” said Brian Sozzi, senior correspondent for financial news site The Street. That’s because Wall Street expects some price increase eventually, and revenue is needed to allow Netflix to continue creating content for its international audience, says Sozzi, also the former CEO and chief equities strategist for Belus Capital Advisors. But surge pricing is unlikely, he says.
“If Netflix goes Uber on its prices and jacks them up at 8 p.m. for Millennials after a long day at work, (Netflix CEO) Reed Hastings may have protests outside HQ,” he said.
Pricing can be a touchy subject for Netflix — and its subscribers.
Six years ago, Netflix raised prices for users who wanted both streaming video and DVD rentals from $9.99 for a plan with both options to $15.98.
Netflix lost 800,000 U.S. subscribers because of the price hike. And subscriber outcry resulted in Netflix backtracking from a subsequent plan, announced two months later, to move DVD rentals to a separate company, Qwikster, meaning subscribers wanting streaming video and DVDs would have to have accounts on two different websites.
And last year, Netflix’s $2 monthly price increase for many customers — from $7.99 to $9.99 — led to a growth slowdown, as some subscribers left.
A hike in subscription prices isn’t the only way consumers might pay more for Netflix. In less than two months, Australia will begin levying a 10% goods and services tax on Netflix subscribers and other foreign Internet services used by consumers. New Zealand enacted a similar 15% tax last year.
Some U.S. cities and states have contemplated taxation of services such as Netflix. Pennsylvania began assessing a 6% sales tax in August 2016. Two years ago, Chicago expanded its 9% amusement tax to Netflix and other streaming services, but the tax has not been levied because a legal challenge is making its way through the court system.
A California state proposal under consideration aims to fend off potential moves by cities such as Pasadena to tax streaming services.