Netflix has invested heavily in its original TV shows and movies this year, dropping an estimated $8 billion to release 1,000 original shows and movies by the year’s end. And a new survey indicates the success of that initiative will give Netflix room to raise prices.
Analysts at Wall Street firm Piper Jaffray conducted a survey, released on Monday, of over 1,100 Netflix users and found that the majority thought the quality of Netflix’s original content has improved in the past year. This factor, along with several others, makes a price hike likely, according to the analysts.
“It would not be surprising to see Netflix bump pricing up across many of its markets in 2019,” Piper Jaffray said in the report.
The analysts said the “primary determinant in the ability of Netflix to raise price is subscriber perception of content quality.”
“We surveyed >1,100 domestic Netflix subscribers and found that 71% of them feel that Netflix content has improved in the past year,” the analysts continued. “We believe, as long as the vast majority of subscribers perceive that the service is improving, Netflix will be positioned to periodically increase prices.”
The survey found subscribers in the US “would be willing to pay ~40% more for their Netflix subscription today.”
The analysts also pointed to Netflix’s emergence this year as an Oscar contender. Netflix has made waves as it pushes its awards favorite, Alfonso Cuarón’s “Roma,” in the Oscar race. It plans to release the film in at least 100 theaters, one of the largest theatrical distributions for one of its movies (even though it will not be released at Alamo Drafthouse).
“While the allure for many Netflix subs has been episodic (series) content, Oscar nominations for upcoming Netflix films would, no doubt, have a favorable impact on existing and potential subscribers’ view of the content being made available to them,” the analysts said.
As Netflix focuses on its library of original content, it is also beefing up its global presence. Analysts predict that Netflix could gain approximately 187 million worldwide users by 2020 as it penetrates markets that have seen slow growth, such as in Asia, where Netflix recently announced 17 new original shows and movies mostly hailing from Japan and India (China is not included in those estimates, as Netflix can’t operate out of the country without a local partner).
“While this level of penetration would be higher than any other comparative subscription entertainment product, we believe the content/value ratio offered by Netflix is, and will continue to be, higher than any other relevant comparative offering,” the analysts said.
More and more consumers are getting comfortable with streaming, as well. A recent report from Ampere Analysis found that older viewers making the switch helped drive subscriber growth for Netflix and Hulu this year.
But Netflix will face increased competition in the coming year. AT&T is releasing a new service next year that will include HBO, and Disney just revealed more details about its service, Disney+, expected to drop in late 2019.