Netflix Price Rise Could Mean Worse Content

5/15/14 1:10PM EST

Netflix Price Rise Could Mean Worse Content Netflix Price Rise Could Mean Worse Content

Image via Flickr/ Seth Anderson

Netflix is raising prices for new customers, and the change in the company’s business has been welcomed by the company’s shareholders. In the medium term the move will boost the company’s revenue, though it may form a headwind for its user growth. In the long term, however, the move shows that Netflix may not have the best content forever.

In the last year shows like Arrested Development, Orange Is The New Black and and House Of Cards have bolstered Netflix’s reputation as a content creator. The company’s deal with Marvel and its constant ability to keep content flowing is another reason that new users won’t mind paying extra for the service. That can’t last forever, and the company’s content may get worse over the coming years.

The Age Of Proprietary Networks Is Not Over

Since Netflix began to dominate the streaming market, many have applauded an apparent end to proprietary streaming networks. Some of the biggest entertainment conglomerates were holding their shows hostage in order to push their own streaming service. Netflix certainly damaged that business, but it’s more likely to become a rule of the industry as time goes on.

Rising costs mean that Netflix will have trouble maintaining its margin. The firm needs to either increase the price it charges for access or limit the amount of money it spends on content. It’s likely that the firm will do a mixture of both, and that means the company’s production is likely to get worse.

More proprietary streaming services, with HBO forming the vanguard, means higher costs for content. Netflix recently managed to secure some of the old shows from the premium cable outfit’s catalogue, but that likely cost a lot and adds nothing that will draw a huge amount of customers in, particularly at the higher price.

While streaming was a novelty, media companies were not sure about the value of their content. Now that they’ve seen Netflix make real money from the business, they know they can too, and they have what it really takes to succeed: the content. Netflix may not have.

Netflix Chooses Content Or Profit

Netflix didn’t raise the price of its streaming service because it’s greedy, or because shareholders are demanding higher returns. The company needed to raise prices in order to afford content. It can’t keep raising prices as content providers increase the cost of their TV shows and movies.

Netflix (NASDAQ:NFLX) will, of course, continue to invest in shows like House Of Cards to keep its name in the news, but the future of the company’ offerings may be worse rather than better. Either that or the company’s shareholders or customers will have to accept less than they were hoping for from Netflix. Shareholders rarely lose in that struggle.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.

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