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Matt Ely | mge5079@psu.edu
January 17, 2019
Netflix (NFLX) looks to remain the front-runner in the streaming business, with the company reporting 8.8 million new subscribers in the last quarter of 2018. This exceeded expectations by more than a million and gave the stock price a nice jolt following the announcement. Much of this growth was lead by strong support from countries overseas. Netflix looks to continue this upward trend into 2019 and hopes to increase revenue even more since last quarter’s fell short of expectations.
Revenue will likely see a spike since the streaming service recently raised the price of its most popular plan from $11 to $13 a month, or roughly 15%. This is the steepest price increase in the company’s history and shows strong market share still exists since this move is not projected to hurt profits. In a very crude sampling from The Morning Brew, 35% of respondents didn’t even know how much they were paying for Netflix which shows very little price elasticity in their market.
Netflix has been pushing their original programming for the last few years and it has shown great success. Most recently, Bird Box- a thriller film starring Sandra Bullock was a hit amongst consumers, reaching 80 million households in the first 4 weeks and inspiring countless memes including celebrity references, like this one from NBA star Chris Paul.
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I believe that Netflix will see continued growth for the foreseeable future if they can keep finding hits with the original programming to cut down on licensing costs of other shows and movies. For example, a deal was reached with WarnerMedia, the owner of Friends to continue to stream the show for 2019 for $100 million. That is a huge jump from the $30 million per year that they had previously paid. If Netflix continues to bear these high costs, prices will keep going up and viewership will eventually decline as many other streaming options have started.
However, a big appeal for audiences is being able to watch their favorite shows that are no longer running on cable and are not necessarily on Netflix for the new shows. So they will need to find the right balance going forward in order to maximize success. But for now, Netflix seems to be going great with no hiccups in sight.
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