Netflix shares dropped 5% after the company announced it is slashing prices in Asia, the Americas, and the Middle East.
Netflix (NASDAQ: NFLX) recently saw its shares fall following news that the company had slashed its subscription prices. According to reports, the streaming giant attempted to increase subscriber growth by slashing prices by 50% in more than 30 countries. A Thursday statement by Netflix read:
“We’re always exploring ways to improve our members’ experience. We can confirm that we are updating the pricing of our plans in certain countries.”
The price cuts will take place across regions such as Asia, the Americas, and the Middle East. Netflix will also apply cheaper pricing to Vietnam, Indonesia, Thailand, and the Philippines. Generally, Netflix’s price development could impact more than 10 million subscribers in the abovementioned markets. However, to offset the lower prices, Netflix increased prices in markets where it wields considerable pricing power.
Netflix Subscription Prices Development, Shares Drop, Come amid Fierce Streaming Competition
Netflix’s quest to optimize prices where possible also comes amid intense competition from other streaming platforms. These include Walt Disney (NYSE: DIS), Warner Bros Discovery (NASDAQ: WBD), and Paramount Global (NASDAQ: PARA). Furthermore, these competing streaming platforms also seek to increase their visibility and expand globally.
Netflix shares tumbled 5.2% to $317.47 in New York following the announced update to its subscription prices. Furthermore, as of yesterday, NFLX was on course for its worst day in over two months. Amid fierce competition last year, the streaming industry has experienced a decline in pandemic-induced fortunes and significant consumer spending. As a global recession looms, several companies within this space are reevaluating their strategies.
Streaming giants have generally hiked prices to secure more revenue in a cost-intensive industry from an operational standpoint. However, a few others, including Netflix, offer lower-priced, ad-heavy subscription plans to customers in low-growth markets. These streaming platforms hope to induce more cost-conscious customers to subscribe by providing cheaper subscriptions in these areas.
Password Sharing Crackdown, Profitability Outlook
Reports state that Netflix is halving its basic subscription plan in these low-growth areas, with other tiers seeing a 17%-25% price cut. However, the Los Gatos-based company’s recent crackdown on password-sharing could also amount to a price increase for several customers.
The password-sharing crackdown comes as Netflix, which currently operates in more than 190 countries, looks to expand even further. The streaming giant onboarded around 7.6 million subscribers in the fourth quarter amid saturated US and Canadian markets. Furthermore, Netflix also experienced a decline in average revenue per membership in the last quarter of 2022.
Summing up its full-year performance in a statement, Netflix said:
“2022 was a tough year, with a bumpy start but a brighter finish. We believe we have a clear path to reaccelerate our revenue growth: continuing to improve all aspects of Netflix, launching paid sharing, and building our ads offering. As always, our north stars remain pleasing our members and building even greater profitability over time.”
The company also announced that co-founder Reed Hastings would step down as CEO. According to Netflix, co-CEO Ted Sarandos and COO Greg Peters would succeed Hastings as CEO.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
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