The film studio that came online needs more money. Netflix announced on January 15 a rise in prices for its clients in the United States that comes to reflect the balance that the streaming giant is forced to maintain between giving the best offer of original content and, at the same time, having an attractive price. Netflix's basic plan continues to cost almost the same as when it was a DVD video store by mail at the beginning of the decade. But it is now a Hollywood studio with an investment in monstrous content.
Netflix is still cheap for the standards of the cost of the films and the series of quality of a few years ago. Their plans are going to raise between one and two dollars a month to the clients of the United States: the basic plan of eight dollars goes to nine; the standard plan of 11 dollars goes to 13; and the premium (4K quality) goes up from 14 to 16 dollars per month. It's still more or less what a single movie ticket costs in a big city in the country. It is the biggest price increase (between 13% and 18%) since Netflix launched the streaming service 12 years ago.
"We changed the prices from time to time while we continue investing in good entertainment and improving Netflix's overall experience. We want to make sure that Netflix gives a good quality for its price and that our entry price is affordable, "the company said in the letter to investors dated January 17. "Our plan for several years is to continue to grow in content significantly as we increase our revenues faster to expand our operating margin." Netflix expects that margin, which was 10% in 2018, to reach 13% by the end of the year. Investors seemed to understand that the price increase ensures greater stability and accept Netflix's argument that there will not be a significant loss of subscribers. Shares rose 6.5% on the day of the announcement.
It has gone from being a DVD video store to having a 10% share in the US
Netflix's career is no longer because it is the best service streaming. It is for having the content so immense and of such quality that it is inevitable to pay your subscription if you want to be up to date with contemporary culture and have a conversation about television or cinema. Ted Sarandos, Netflix's content manager, explained it this way in 2015: "We firmly believed that Internet TV was the future and that most movies and entertainment would enter the home through the Internet. We realized that, if that was going to be as we thought, the technology to do it at some point was going to democratize, everyone would have the same. I believe that we have the best streaming technology in the world. But even with that, at some point things were going to be standardized and we had to prepare for Netflix to have competition. The way to do it was with their own programs ".
Then Sarandos separated what Netflix was doing from the service that Amazon Video, Apple iTunes, Sony Playstation and other portals began to offer, which functioned as videoclubs on demand by streaming. "There are many services that sell the same movies for $ 1.99. That is not a very exclusive business in which to be or provide you with a relationship with the client. " The company saw no future in being a video store, not even the best video store. Two decades ago Bill Gates predicted that "content is king" in Internet business, not technology. Netflix has taken that mantra to the letter. Because the democratization of the technology pointed out by Sarandos has already arrived. The Youtube Premium, Hulu or HBO Now service and the upcoming arrival of a Disney streaming portal, all as easy to use as Netflix, supposes its end as an argument of differentiation. Netflix can no longer sell that, and it's only a matter of time before it starts losing content amounts from the other studios, depending on whether they have their own services. The only way out is in its own content.
Shares rose 6.5% on the day they announced the increase in their rates
Netflix's race to build a catalog has left dizzying amounts in Hollywood. He started spending $ 100 million (unofficial figure) on House of Cards eight years ago. Its total investment in own and foreign content in 2018 was about 12,000 million dollars. His plans were to launch some 80 movies and 700 new shows. In films, Birdbox took out, which saw in the first week 45 million of its 137 million subscriptions. He has done Buster Scruggs' ballad with the Coen brothers. And above all, he has released Rome, the film by Alfonso Cuarón that this week achieved 10 nominations for the Oscars and made history for a film in Spanish and black and white.
The success of 'Roma'
In just eight years, Netflix has gone from being a DVD video store by mail to having an Oscar nominated film and being admitted to the Motion Picture Association of America with Disney, Warner, Paramount, Sony, Fox and Universal. According to his letter to investors, he estimates that 10% of all the time that Americans spend watching television is theirs. The price of this is a disturbing debt of 8,300 million dollars. And by his own words, he does not intend to stop producing mass content, so a price increase is the minimum to calm investors.
The first Oscar for the best film was won by Paramount, in 1928. The second, the following year, Metro Goldwyn-Mayer (whose catalog was partly taken over by Sony). The first Oscar for the best film for Universal came in 1930. Fox's in 1933. Warner Bros. got it in 1937. Walt Disney is the person with the most oscars in history, 22. The studio he founded has shaken the industry several times with milestones such as Mickey Mouse, the first animated long (Snow White) or the first theme park.
That's the kind of legacy Netflix faces. You can make Birdbox, but not the series of horror classics that Universal did in the thirties. You can throw the rest in producing familiar content, but Disney has been building since 1923 a catalog of children's movies worshiped by children all over the world and perfectly recognizable as films with their seal. The key to the future of Netflix is how fast it will be able to build a legacy of similar content, how much it will cost and how long it will be profitable.
Along the way, that strategy is leaving a monumental television catalog that has won 43 Emmy awards in just five years. And in 2019 a film with 10 nominations to the Oscars that will be part of the history of cinema no matter what happens. And how much is it worth having all of that at the tips of your fingers? Each time a little more.