An increasing number of Netflix subscribers are opting for the premium service tier that offers more features, reflecting a growing industry trend, according to new OTT video research from Parks Associates.
The firm reports that despite a price increase last October, 30 percent of Netflix’s 130 million subscribers are now in the premium service tier, up from 21 percent in late 2017. Netflix again raised the prices of plans earlier this year, with a premium subscription now costing $13.99 per month.
Uptake of Netflix’s basic service tier, meanwhile, has dropped from 35 percent in Q3 2017 to 27 percent.
Parks Associates Senior Director of Research Brett Sappington pointed out that the services premium tier offers up to four concurrent streams and access to Ultra HD viewing, while the basic option only allows viewing on one screen and SD quality.
“Consumers value access to multiple streams, particularly for popular services, making a premium tier with multiple streams a moneymaker for OTT video services,” Sappington said in comments emailed to CED.
The shift toward premium subscriptions reflects a broader trend the firm is seeing across the industry, according to Sappington.
“We will likely see OTT video services offering premium tiers of service over time,” he noted. “It is a way for services to gain incremental revenues without raising the base price of the service.”
Offering multiple streams also minimizes conflicts, as homes now see multiple viewers watching across a variety of devices, according to Sappington.
“Many OTT-subscribing households have multiple people who want to watch similar content at the same time,” Sappington said in a statement. “Rather than competing for access, consumers are willing to pay extra for the convenience of multiple streams. At the same time, consumers want to watch on TVs, making HD viewing a must.”
He added that current demand for Ultra HD TV is still small, but growing.
Earlier this week Netflix released its second quarter earnings, and reported subscriber additions that fell well below expectations. The streaming giant added 5.1 million subscribers globally, missing its projections by more than 1 million. This was the first time in more than a year that Netflix didn’t beat its own subscriber growth forecasts.
Still, even with the disappointing subscriber figures, Netflix earnings grew 32 percent year-over-year to $384 million, or 85 cents per share, beating analysts’ estimates. Revenue was up 6 percent to $3.9 billion.