How Netflix Could Gain More Customers and Profit… or Lose Them Both

With a new plan to roll out a few new packages with varied price points, Netflix is hoping to get the attention of those who may not have considered them an option before. One new package will be cheaper than any of the current Netflix offerings at $6.99 per month, with the hope that those focused on their family budget will say yes to streaming video. But some in the finance world have suggested this could be suicidal for Netflix, and could cause their current customers to downgrade. While this will obviously happen in some cases, chances are there won’t be a tsunami of existing customers who downgrade—they are too used to being able to stream on multiple devices, and the $6.99 package doesn’t offer that. For people with kids, this would mean no more R-rated movies in the living room while Junior watches “My Little Pony” on her tablet in her bedroom. If you have experienced the joy of this option, chances are you understand it isn’t worth saving a buck per month over.

But Netflix has other ideas too—ideas for higher priced packages that will give consumers the option to stream on even more tablets, phones, televisions, computers, and so on. In April of 2014, Netflix plans to roll out an $11.99 package that is seriously everything but the kitchen sink; this Von Trapp family-sized package allows for four different shows to stream on four different devices. If that doesn’t do it for you, maybe you need to get out of the house for a few hours.

But Netflix isn’t just pulling the idea of different packages out of thin air. With Amazon Prime offering very real competition in the streaming video world, and with purchasable episodes of our favorite shows on YouTube and iTunes, and the new streaming video from Redbox already available, Netflix will have to make sure it maintains a loyal and growing fan base. One of the essential ways they do this is by offering up phenomenal series that can only be seen on Netflix: “Orange is the New Black” and “House of Cards” have had Netflix users all but going bonkers—they’re totally addicted, and evidence of this is all over social media—lots of exclamation points and lots of Facebook updates like, “OMG, who isn’t watching Orange is the New Black? Stop what you’re doing and watch it immediately! #OrangeIsTheNewBlack #favnewshow”

Even in the face of competitors, consumers can be skeptical about brands like Redbox; while it may not be fair to suggest, it is easy to understand why those on the Netflix train, which has made subscribers very happy, aren’t likely to switch tracks to the company that rents DVDs outside of pharmacies and grocery stores. With that said, Amazon may be a real contender, and in that sense, the idea of a pricing option for Netflix might be the best idea for keeping it fresh in the new year.

It’s clear that Netflix is entering 2014 with an edge over its competitors, but knowing whether they will end 2014 with that same edge isn’t really easy to forecast, even for the most knowledgeable financial experts. But with that said, if Netflix’s 31.1 million users (as of September 2013) are any indication of how bright their future looks, then Netflix should maintain their status as the big dog unless something unforeseeable happens.

Please feel free to email Ella Gray at ella.l.gray@gmail.com with any questions or concerns.