Question

What do we expect to happen to Netflix's revenue due to the price increase?

Essay

Regardless of the implementation of the price increase, the higher monthly prices seem to have impacted the growth of membership among US subscribers. In the two quarters before the price increase, Netflix added net membership of 1.6 million and 2.2 million members. By contrast, the number of members added in Q2 was only 160,000, and in Q3 only 400,000. The Q2 growth in US subscribers was the lowest since Netflix began reporting those numbers.

Answer 1

Netflix has added net membership of 3.8 million members in the two quarter before the price increase. These customer base is huge but it has much more scope looking at the population of the country. When Netflix increased the price of its subscription, the growth rate has fallen . Only 560,000 members were added post price increase.The growth rate has sharp decline. This phenomena can be relate to law of demand which states that " As the price of good increases , the demand for it decreases where all the conditions are being unchanged.

In the case of Netflix, nothing changed , all the conditions were equal . The increase in price of the subscription led to decrease in demand which resulted in the fall of new subscribers net addition. There are lot of factors for decreased demand , it might be due to less spending power, ongoing recessions, higher taxes, etc. People would usually spend only if they have good spending capacity .