Netflix is testing a higher price point “Ultra” subscription plan
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Netflix is testing a higher price point “Ultra” subscription plan

Streaming video on demand (SVOD) market leader Netflix is experimenting with a higher-priced subscription plan. The new “ultra” subscription is currently just a test, but it could eventually offer the company a clear path to more profit – assuming consumers like what’s on offer. Netflix is rightly cautious about charging customers more for its service – back in 2011 the company lost 800,000 U.S. subscribers when it raised prices on a combined streaming video and DVD rental package. It doesn’t want a replay of that failure.

Netflix’s share price has risen by an incredible 113% so far this year

graph0907 netflix

SOURCE: Yahoo Finance

Netflix’s ultra package includes 4K Ultra HD video with HDR (High Dynamic Range) quality – basically, the picture and sound on these plans is going to be even better than customers are used to. At time of writing, Netflix has a few shows that make use of 4K, and almost none that make use of HDR – but expect that to change as the tech becomes more commonplace in front rooms around the world. The new subscription package also includes the ability to watch Netflix on up-to four screens at the same time, and it costs around $3 more than the company’s “Premium” subscription package.

In a press release, Netflix highlighted the fact that Ultra is, currently, very much in test mode: "We continuously test new things at Netflix and these tests typically vary in length of time. In this case, we are testing slightly different price points and features to better understand how consumers value Netflix. Not everyone will see this test and we may not ever offer the specific price points or features included in this test."

As tech continues to proliferate, there’s no doubt that Netflix has the potential to, at some point, offer another price point to its service. Given that it has over 125 million subscribers at present (and that number’s still growing), a new plan could deliver significant new revenues to the company… provided they get it right. Investors, at least, seem to have faith in Netflix – the company’s share price increased by 2% on the back of this news.

Disclosure

Dominion holds Netflix in its Global Trends Ecommerce Fund.


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