Netflix just raise prices in Spain. And it has done so just two months after announcing an increase in its cost in the rest of Europe that already predicted what was going to happen and a year after increasing increases also in the United States and in Mexico, in the latter territory to accommodate its cost to new government taxes.
This rise in Spain affects two of its three plans. Just the basic (allowing playback on only one device at a time and at the lowest level of quality) remains frozen at 7.99 euros per month. For their part, the rest of the plans go up like this:
The standard plan (two screens and HD) goes from 11.99 to 12.99 euros per month, one euro moreEl plan premium (four screens and 4K) goes from 15.99 to 17.99 euros per month, two euros more
Up to 50% more in just five years
Netflix arrived in Spain in October 2015 with a price proposal that ranged from 7.99 for its basic plan – the only one that has not moved – to 11.99 for its premium plan.
This means that in just five years his highest plan has risen 50% to the current price of 17.99 euros, a cost that by the way is equal to that also given in the United States by the same modality.
The following graph shows how Netflix has been raising its prices in Spain.
Only five years his highest plan has risen 50% in Spain to the current price of 17.99 euros
If we look with perspective, after landing as in many countries with attractive plans, Netflix has been raising its prices every two years in a cyclical way. In the United States, only since 2019 has it dared to touch its basic price plan. And, most importantly, in 2020 it took a turn to start raising its prices annually and not biannually.
Why is Netflix raising its prices? The need not to stop growing and spending
There are many reasons behind the price increases, but the main one is that Netflix is beginning to leave behind its expansive growth model, in the which kept reinvesting all its profits and juggling cash flow to spend more and more on creating new original content.
In 2020 it is estimated that Netflix spent $ 17 billion to create his own series, a basic necessity for its growth (or maintenance) now that the market is already plagued with competitors who have their own platforms.
In a nutshell, Netflix no longer serves as a third-party content distributor (Like Disney, which has had Disney Plus since 2019) and needs more and more revenue to generate content that in turn attracts and retain subscribers. A continuous money spending cycle.
Moreover, increased competition has also increased the churn o the rate of unsubscribing subscribers. Users who peck at Netflix for a few months, and then sign up for another platform. This may seem counterproductive with a price increase, but it is also true that Netflix needs to earn more and more money for each user.
Netflix is the champion, with an abandonment rate lower than the rest that is barely around 2.5%, but which has risen in recent times, as we analyzed in Hypertext here.
Because this takes us to a third level, and it’s true growth stagnation. After gaining 16 million users only in the months of confinement in 2020, Netflix has already warned in its investor calls that its figures would be frozen. In mature markets such as the United States, it has even begun to lose a few hundred thousand users, something that counteracts the growth in new territories, where in fact – as it is testing in Kenya – it offers access to free plans.
On Netflix, in short, it seems that they want to keep all users They have a basic plan, but are testing whether their higher paying users also accommodate this new cost.
Netflix as a pioneer of streaming has never considered an annual plan at the moment
In any case, their comings and goings in their policies regarding account sharing also seems to have a weight here, since those 17.99 euros per month that the premium pack will cost in Spain is a significant sum, and more when the competition, such as Disney Plus, Apple TV + or the novelty of HBO Max maintain lower prices or annual options that also make it cheaper. An annual plan that by the way, Netflix as a pioneer of streaming, has never been considered.
Be like cable TV before cable TV is streaming
Photo by Sayan Ghosh on Unsplash
But, at what point will not only Netflix, but the price of OTT platforms in general, hit the ceiling?
For now, it seems that the high point has not been reached, although the increases that we will see in the coming years already attack the basic and intermediate plans.
The key to increasing prices without significant spikes in write-offs or dissatisfaction is to convince customers that they continue to obtain good value for it, and there is its growth in number of titles, but also to insert itself in customers as a service as basic almost as internet access.
“The goal is to become HBO faster than HBO can become us“Current Netflix co-CEO Ted Sarandos said in an interview with GQ as early as 2013.
But in reality Netflix has no longer only sought to replace HBO (the benchmark cable TV in the United States) but also many competitors. Netflix has focused on a broad offering, including animated children’s shows, reality shows and game shows beyond series and movies.
In short, an all-in-one from which it is becoming easier not to leave for the consumer. Who knows, maybe in a few years to curl the loop, Netflix will make the leap to having its own news show as a newscast.