Cheaper Cost for Disney and Apple Streaming Services Won't Stop Netflix From Raising Sub Fees

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Cheaper Cost for Disney and Apple Streaming Services Won’t Stop Netflix From Raising Sub Fees

by Tim Baysinger and Sean Burch | October 16, 2019 @ 4:33 PM

Streaming giant isn’t worried about its new competitors costing half as much

Netflix’s chief product officer says the company isn’t worried that the cheaper cost for rival streaming services from Disney and Apple will hamper its ability to raise its own prices.

“I think the pricing of our competitors, we don’t feel, is a real significant factor in determining what we can charge for our services,” Greg Peters said Wednesday during the company’s third quarter earnings call. Disney and Apple are launching their own streaming services next month, both of which will be priced much lower than Netflix, whose subscription packages range from $8.99 to $15.99 a month in the U.S.

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Apple TV+, launching Nov. 1, will cost $4.99 a month (or free for a year for those who buy a new iPhone, Mac or an iPad). Disney+ hits the market 11 days later on Nov. 12, and will cost $6.99 a month, or $69.99 for a year. Disney is also offering a bundle that adds Hulu and ESPN+ for $12.99 a month.

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“Our job into what we think about pricing from a longterm perspective, is continuing to take the revenue that we have that our subscribers give us every month [and] judiciously and smartly invest it into increasing variety and diversity of content, where we really want to invest in class, across every single genre,” Peters continued. “If we do that and we’re successful in making those investments smartly, we’ll be able to continue to deliver more value to our members. That really will enable us, from time to time, ask for more revenue.”

Netflix raised its prices nearly 20% earlier this year. The company, after losing domestic subscribers for the first time ever during Q2, blamed the price hikes as key reason for the customer exodus.

On Wednesday, Netflix reported it added 6.8 million new subscribers during the third quarter — falling a bit short of the 7 million subscribers it had forecasted. U.S. subscriptions bounced back during Q3, with Netflix adding 500,000 domestic customers. Still, that fell short of the 800,000 U.S. subscribers the company had anticipated.

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“Since our US price increase earlier this year, retention has not yet fully returned on a sustained basis to pre-price-change levels, which has led to slower US membership growth,” Netflix said in its letter to shareholders.

Despite missing on its subscriber goals for the second straight quarter, Netflix’s investors didn’t seem to mind. The company’s stock price jumped 10% in after-hours trading, surpassing $300 per share for the first time since August. The move likely stems from Netflix easily trumping its earnings projections for Q3.