Majority of Netflix subscribers in the US and Canada are willing to pay $12-15 per month, but they pay more and spend more on Pay-TV
Netflix, Inc. (NASDAQ:NFLX) is un-grandfathering a large number of its subscriber base and increasing its standard plan to $9.99 per month and accrediting it for higher churn and weak growth during the second quarter. A new study reveals that its subscribers were willing to pay far more than $10 before discontinuing the service.
Grand Forks Herald reported that TiVo’s Digitalsmiths conducted a study during the second quarter and found that 21% of Netflix users in Canada and the US would pay at least $16 on monthly basis for its service. 8.4% and 6.5% of the subscribers were willing to pay $16-19 and $20-23, respectively. While 3% fell in the $24-27 range, 1.7% and 1.4% of them said they would pay $28-31 and at least $32, respectively.
A large number of subscribers (29.3%) said that they would not pay more than the existing prices for Netflix’s subscription packages. Majority of 39.1% were comfortable paying between $12 and $15 per month. 10.6% of the remaining respondents did not give an answer in a survey of 3,114 Canadians and Americans.
It is highly likely that Netflix will further increase its prices for the next couple of years, but it is interesting to see how much leverage does the streaming giant has in its core markets, as it is already considered expensive in the new Asian markets. Netflix will compensate the subscribers by investing more on original and exclusive content, which should be more next year than the $6 billion slated for this year.
Additionally, consumers already pay a lot of money on pay TV. According to Digitalsmiths survey, roughly 35% of respondents spent at least $100 per month on cable TV, while 49% pay $51-100 per month and 16% pay at most $50.
There is large number of people who still spend more time watching content on conventional TV than online. The study showed that 59% of SVoD subscribers viewed content for at most two hours per day and merely 5% watched content for at least five hours. Conversely, a US household watched roughly 4.5 hours on average of pay TV per day in the first quarter, according to Nielsen.
The research also found that about 10% of Netflix and other SVoD subscribers, like kids, friends and family, use other people’s account.