Netflix`s Pricing Strategies to Arrest Falling Subscriber Numbers

Case Code: MKTG445 Case Length: 6 Pages Period: - Pub Date: 2022 Teaching Note: Available

Price: Rs.300 Organization : Netflix, Inc. Industry :Leisure & Entertainment Countries : United States Themes: Pricing, Marketing Strategy, Competitive Strategy,Business Models

Abstract Case Intro 1

Introduction

On April 19, 2022, Netflix, Inc. (Netflix), the largest streaming service in the world, announced that it was planning to introduce new ad-supported subscriptions. The ad-supported memberships would be added as tiers, with subscribers being given the option of paying a fee to not see the ads..

Netflix and its Changing Business Models

Netflix was founded in 1997 by Reed Hastings (Hastings) and Marc Randolph to provide Digital Video Disc (DVD) sales and rental by mail, a business model which proved to be a game-changer in the video-renting market. Netflix then introduced a subscription model, where customers could rent DVDs online for a fixed fee per month..

The Change in Scenario

Over the years, to meet the limitless demand among consumers for new content in the streaming market, new players offering their own unique content emerged, thereby raising the competition. That scenario led to a corresponding introduction of new subscription plans in the streaming market. Several flexible subscription plans began to be introduced..

A Change in Direction

As a solution to the high cancellation rates and to appeal to a larger section of the population, streaming companies began to increase their expenditure on content creation, content acquisition, and talent retention. Netflix also increased its content creation budget, particularly for producing more original content. However, to compensate for its increased investment in content creation, Netflix hiked the prices of its service to get a proper return on its investment..

Exhibits

Exhibit I: Information on Leading Global Streaming Companies
Exhibit II: Netflix’s Subscriber Market Share, in the US, as of 2020
Exhibit III: Netflix’s Price Chart in the US and Canada (in US$)

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