RECORD PROFITS FOR video-streaming service Netflix, despite price hikes for consumers, could pave the way for more fee increases in the future.
The on-demand giant saw a 36.9% increase in second quarter revenue to $1.34 billion, largely thanks to an increase in charges for subscribers, including new Irish customers.
According to analysts, the positive figures could encourage the US player to push prices up in countries where it has been active for a while – such as the UK and Ireland – as it seeks ways to fund growth in newer markets.
Market hopping
City Index Group chief market strategist Joshua Raymond said that the Netflix strategy is usually to land subscribers with price hikes after becoming established in a market.
“They need to establish themselves in particular regions, grow loyalty, then they go on price.”
“You could probably expect internationally that they may move (prices) up. Prices are only going to go one way.”
Trends bucked
He argued that previous price hikes have hurt the company’s profitability and share price, but that the strong second quarter figures could encourage Netflix to move prices up again in the future.
“Considering what happened (after previous increases) three years ago..it restores shareholder faith because it shows they have flexibility going forward.”
Nonetheless, any price increase before 2016 is unlikely given the company’s commitment to freeze prices until then.
On Netflix strategy, he said that the company will most likely move into France, Germany, Austria and Switzerland next, before targeting major Asian markets in coming years.
Major successes such as prison drama Orange Is The New Black are behind much of the company’s success, he said, often leading the marketing charge into new countries.
“You get a loyalty base built on hero projects like Orange Is The New Black and House of Cards, then they keep them rolling over new seasons.”
Edited 15.26
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