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Netflix Will Raise Prices

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HBO NOW is just one of the many competitors challenging Netflix. As more competitors enter the fray, Netflix loses the almost-exclusive market they enjoyed. They don’t really compete with Hulu Plus, as the services offer complimentary content. To some degree, this is true of HBO NOW, but the services overlap quite a bit more.

HBO offers original shows that rival Netflix-produced programs. They also offer better movies, although the selection is smaller. The connoisseur viewer may opt for HBO NOW’s high quality programming and cancel Netflix, which may seem inferior. As the collusion between TV providers (cable, satellite), networks and content producers dissolves, more streaming services are entering the market. There is a strong rumor that Apple will launch a complete “cable” channel line-up directly on Apple TV. Many networks are streaming their content, free of charge, to viewers. Netflix isn’t special anymore.

Rate Increases Are Only Acceptable With Better Content

The justification Netflix provides for raising rates is simply ridiculous. The claim that they must raise rates to meet inflation is irrational. The decreasing costs of technology and economies of scale benefits should outweigh inflation’s impact. They should instead promise to increase the quality of their content. They have come a long way in this respect. I used Netflix streaming almost 10 years ago, and the options were paltry and unattractive. The service would go offline in the late evening for maintenance. It was almost as cute as Comedy Central in the early days.

To justify a rate increase, Netflix needs to acquire better content. They need to get the Star Wars movies and other blockbusters. Producing better original content must be a priority. House of Cards is overrated and relies heavily on product placement to increase revenues. The product placement is oppressive and detracts from the narrative. Unfortunately, it is their flagship orignal program. To succeed, they have to get blockbuster movies a few months after they debut in theaters. The need to get popular TV shows the day after they have aired. The problem is that Netflix is not a Hollywood-friendly business. They are a Silicon Valley corporation. They are outsiders trying to assemble their own entertainment vertical. Corporations like Apple and HBO can dance circles around Netflix when it comes to negotiating content deals. HBO offers better original programming.

The only certainty is that Netflix will raise rates for long-time subscribers starting next year. It remains unclear whether the streaming giant will be able to out-negotiate bigger players. Loyal viewers may grow tired of Netflix and move on to greener pastures.

I haven’t watched Netflix in weeks. I don’t cancel because I am hedged into a low rate. When this changes, I can see cancelling Netflix and signing up for just a few months. There are new and exciting options every day. This is the year of the cord-cutter. HBO NOW could very well be a Netflix killer. At the very least, it will maim them. Netflix can only raise prices and keep subscribers if they improve their offering. While this is possible, they face a lot of competition. Larger corporations can forge exclusive deals, leading to a decrease in Netflix subscribers over time.

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