Benzinga, Benzinga ETF News

This Chart Shows Why Netflix Pricing Strategy Is Working

Netflix, Inc. (NASDAQ: NFLX)’s stock continued Monday to hit new all-time highs after the company confirmed a price increase for its two highest membership tiers. The price increase does mark the third of its kind since the video streaming option was launched in 2011, Statista highlighted.

Granted, subscribers don’t like a price increase in any service they pay for but this isn’t necessarily the same for shareholders, Statista argued. Netflix’s shareholders, in fact, appear to “back the company’s decision” as higher prices will result in higher revenue — although this does make some basic assumptions about churn.

While prior price increases for Netflix has resulted in a slowdown in subscriber growth it has never resulted in the metric turning negative, Statista added. Over the past six years, the contribution profit (that is, revenue minus costs that are directly attributed to the segment and not the international business) from the U.S. domestic streaming business has increased nearly five-fold while at the same time its contribution margin improved from 23 percent back in 2012 to 36 percent in 2016.

Below is a chart from Statista that shows a clear correlation between Netflix’s domestic streaming subscriber base, revenue, costs and contribution profit.

Infographic: Netflix's Pricing Strategy Works as Margins Improve | Statista
Related Links:

Wall Street Is Mostly Positive On Netflix’s Price Hike

Netflix Investor Apathy May Set Up Near-Term Upside; Analyst Raises Target To $225

© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Article Source: http://www.benzinga.com/news/17/10/10156041/this-chart-shows-why-netflix-pricing-strategy-is-working?utm_campaign=partner_feed&utm_source=stateofthemarkets&utm_medium=partner_feed&utm_content=site

About the Author