Recently, Netflix decided to increase their prices for U.S. subscribers because they wanted to provide “more choice” for their customers. In July, this price increase only applied for new subscribers but since September 1st, existing subscribers have also been subjected to pay these raised prices. Before this change, customers only had to pay $9.99 (U.S.) a month to watch unlimited online streaming movies and to receive DVDs in the mail. However, customers now have to pay $15.98 (U.S.) for the same bundled package or $7.99 (U.S.) for either streaming movies or mailed DVDs.
Two weeks after this price increase, many subscribers made an impacting choice “to walk away from Netflix altogether” (Globe and Mail). This choice was made by so many of Netflix’s subscribers that by next month, Netflix estimated that they will have a decrease of one million subscribers than predicted in its last earnings report.
Netflix's Logo
In my view, Netflix has made a poor and hasty decision that has really damaged their business and their brand. They did not have the content or enough customer incentive to justify their raise in prices, which caused a tremendous drop in their subscribers. Netflix has to make significant improvements to repair the damages made, especially since their competition has been heating up. Reed Hastings, the CEO of Netflix, should learn about elasticity, as explained on Sharon Shi’s blog, to fully understand how to achieve subscriber happiness and to prevent this downturn from happening in the future.
http://www.theglobeandmail.com/globe-investor/netflix-lowers-us-subscriber-forecast/article2167137/