Latest

Why isn’t the Netflix price hike higher in Canada?

A combination of factors including competition and psychological thresholds may be responsible.

netflix, netflix price hike

Netflix Price Hike:

Read in 1 minute

The tanking loonie is making it expensive for Canadians to buy all manner of U.S. imports, with the pain being particularly sharp in the technology sphere.

Apple’s new iPhone 6S, for example, starts at a $250 premium in Canada over what it’s going for in the United States. New video games are about $20 more expensive north of the border.

Curiously, Netflix is priced the same in both countries – and will continue to be so after the price hike announced last week. The two-stream, high-definition subscription tier will be $9.99 in Canada and the U.S. despite the loonie being worth around 25 per cent less than the greenback.

Sure, Netflix is digital and not a physical good, but other online subscription providers are differentiating between the currencies.

Adobe and Marvel Comics are just two companies that sell their subscription services to Canadians at U.S. prices, which makes them more expensive – relatively speaking – than what Americans pay.

So why isn’t Netflix charging Canadians more? And why didn’t the company take last week’s price hike in both countries as an opportunity to increase Canadian prices by $1.25 or even $2?

Aside from explaining that the company’s content-acquisition costs are increasing, representatives aren’t really saying.

“Our aim is to continue bringing a second-to-none streaming experience and great content to our members at a reasonable price,” spokesperson Marlee Moseley said in an email.

In the absence of an official explanation, we can only hypothesize.

One possibility is that Netflix doesn’t want to scare off Canadian subscribers, who will soon have a wealth of streaming choices.

Rogers’ and Shaw’s joint venture Shomi opened to all Canadians this summer and Bell will do the same with its Crave TV service in January. It remains to be seen how much appetite Canadians have for subscribing to more than one streaming service.

Another possibility is that Canada is delivering satisfactory returns for the company.

Netflix’s average monthly revenue per paying membership among international subscribers – a group that counts Canadians – was $7.40 (U.S.) in the most recent quarter, or about $9.65 (Canadian).

That’s very close to the new North American price announced last week, which means Canada is right on par with what Netflix is earning internationally.

Canadians may be getting a slightly cheaper ride than Americans, relatively speaking, but they’re punching their weight when compared to other countries.

One other likely factor is the psychological effect that bigger price hikes might have. A poll last year found nearly half of Netflix’s subscribers would abandon ship if faced with a $2 price hike.

This is probably why chief executive Reed Hastings has promised that increases will be gradual. But make no mistake – they’re coming.

Tweet about this on TwitterShare on FacebookShare on Google+Share on LinkedIn

Leave a comment

Your email address will not be published.


*