Netflix Tries To Blame Press Coverage Of Its Price Hikes For Lower Than Expected Subscriber Additions
from the shoot-the-messenger dept
But in a Netflix letter to investors this week (pdf), the company tried its very best to try and blame the press coverage of its rate hikes -- not the rate hikes themselves -- for the company's slower than expected growth:
"Gross additions were on target, but churn ticked up slightly and unexpectedly, coincident with the press coverage in early April of our plan to ungrandfather longer tenured members and remained elevated through the quarter. We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering."It was the press coverage of your staggered rate hikes that annoyed users? It was member "perception" of that news that was to blame for people leaving? That's some very Comcast-esque spin from Netflix, who throughout the letter consistently replaces the phrase "price hike" with "grandfathering" as if the investors they're talking to aren't bright enough to tell the difference (and perhaps that's true):
"While ungrandfathering and associated media coverage may moderate near term membership growth, we believe that ungrandfathering will provide us with more revenue to invest in our content to satisfy members, thus driving longterm growth. Over the second half of this year, we’ll complete ungrandfathering. Our three tier pricing (in the US: $7.99 SD, $9.99 HD, and $11.99 UHD) is working well for us and for new members, and our gross additions remain healthy."Of course to be fair, one small U.S. price hike isn't really much of a big deal for a company that just expanded into 130 more countries only back in January. Also, if you recall, the internet media went into histrionics a few years ago after Netflix bungled its DVD arm spin off (Qwikster, RIP) and imposed a different rate hike, one many analysts insisted spelled doom for the company. The reality is most people still find Netflix to be an incredible value in the age of soaring legacy cable TV prices, and the company still has some leg room on both international growth and pricing.
But just like its traditional cable counterparts, Netflix is going to start having to feed insatiable investors with either additional international growth (likely China), or price hikes on existing customers. And just like any innovator pressured by Wall Street's incessant hunger for more, the company's strategy will slowly but surely shift from disruption to turf protection as streaming competitors arise and cable figures out it needs to compete on price. And while these recent hikes may not be dramatic, they're arriving as Netflix's overall catalog has shrunk in the last few years by as much as 40% by some estimates.
So while the Netflix of today remains a better value and more consumer friendly on issues like net neutrality (usually), the decision to start charging more for less -- then blaming the press when consumers balk -- is a relatively Comcast-esque move that may not bode well for the Netflix of tomorrow.