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Raising Prices and Profits at Netflix

The very first blog I penned for Cengage back in the middle of 2011 explored Netflix and its shift from a mail distribution model to a digital one. Since then, the company has been going gangbusters and is now a well-oiled, vertically-integrated machine. It is a market leader and as such has pricing power. But up until recently, marketers worried that raising prices for its streaming services would reduce the company's subscriber base. And that's exactly the sort of thing a marketer should be worrying about; but Netflix is even "stickier" than it thought.

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Despite raising prices by over 10% during the last year for most customers, the company posted its strongest subscriber growth since going public 16 years ago. It added well over 7 million subscribers to reach 125 million, which should give Netflix plenty of money to help fund the $8 billion it intends to spend on over 700 original pieces of programming, including 80 movies this year. So far, no contender has emerged to challenge this juggernaut. So far.


Discussion: How much do you pay for streaming content? Do you subscribe to Netflix? If so, how price sensitive are you?

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