Netflix announces plans to raise subscription prices amid debt situation

Netflix in debt. Graphic by Jenny Rigney

Netflix in debt. Graphic by Jenny Rigney

Netflix’s large customer-base, including students at Oklahoma Christian University, may see their monthly bill increase, as the media giant adjusts its subscription offerings.

As television streaming technology increases, apparently so does its debt. While it may appear Netflix is thriving — particularly among college students — recent reports from ABC News reveal the unending need to reinvent and keep up with changing times may actually inhibit the company’s ability to pay its bills.

A report from the Los Angeles Times said Netflix’s debt has reached a total of $20.54 billion. This deficit is the result of its attempts to offer original content — different shows viewers cannot find on other TV streaming services. The same report said Netflix plans to spend a minimum of $6 billion this year alone.

Oklahoma Christian Professor of Marketing and Management Burt Smith said he does not like debt, because it acts as a sort of “big ugly cloud” hanging over the individual’s head. However, he said sometimes debt is just a part of business.

“Netflix is kind of in a ‘have to’ situation, and what makes it ‘have to’ is competition,” Smith said. “If they don’t keep and grow subscribers, they’re going to lose to the competition. The way to keep and grow subscribers is to have more content. To grow that content, they have to go out and be able to purchase it, so it’s a self-fulfilling kind of a thing. The debt is kind of necessary.”

In April 2017, lendedu reported Netflix to be the key leader in TV streaming options. The organization’s study found 84 percent of the 6,660 millennials polled chose Netflix as their go-to streaming site, when asked to choose one.

According to a recent twitter poll, 75 percent of 105 participants in the Oklahoma Christian community said they use Netflix more than any other TV service. Only 11 percent of voters said they prefer to use Hulu, and 14 percent marked other as their ideal option.

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Similar to the data the poll suggests, Smith said Netflix has a loyal following from the college-age, target-market base. He said the customer ultimately benefits the most from companies like Netflix, because they receive so much product for such a low cost.

“As long as Netflix keeps its customers happy, they shouldn’t have [competition] to worry about,” Smith said. “I know a lot of students and graduates that never subscribe to cable. They do any number of online streaming things, Netflix chief among them. Amazon is really getting to that space as well.”

To improve streaming services and adapt to new offerings, CNN said Netflix is raising its prices on standard services and premium services — increasing monthly subscription prices by about $1. However, their basic services will stay the same.

The results of a follow-up Twitter poll said 63 percent of voters would continue to pay for their Netflix subscription following a price increase.

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Junior Camille Cave said she mostly watches Netflix on her friend’s account, but could not afford a subscription for herself if Netflix chose to raise the prices. She said she has friends who subscribe to other streaming services, to access their favorite shows.

“I don’t really have a job, so I’ve got to be careful about [spending],” Cave said. “I don’t have a Hulu, but some of my friends have Hulu. I feel like, because Netflix doesn’t have everything that everybody wants, people get Hulu or Amazon Prime or something else so they can get the shows that they want. Netflix keeps changing, because they’re like, ‘Oh, we’re going to add this and we’re taking that away.’”

According to Business Insider, around 92 percent of college students have a Netflix account — some have their own account, while others share accounts with friends and family. Specifically, a study conducted by Business Insider in 2016 said U.S. viewers tend to favor Netflix over competitors such as Amazon and Hulu. Teens alone said they were 12 times more likely to choose Netflix over other streaming options.

Senior marketing student Michelle Oehlert said she researched Netflix’s recent data showing their annual debt and profit. She said she believes the company’s marketing methods will pay off in the long run, because they are continuing to slowly pay off their debt. However, Oehlert said there are elements of the television streaming company which could use improvement.

“I definitely think their online streaming service needs a little more variety,” Oehlert said. “I actually think I might prefer Amazon Instant Video, because they have a pretty large variety. I think Netflix definitely needs to expand their variety more for college students, which they are doing and they’re working on with their original shows and movies.”

According to Smith, the success of the changes will mostly depend upon how the company markets the modifications to its customers, primarily college-aged young adults. He said Netflix needs to build on its existing customer base, and provide them with the content they want.

“A lot of it too could be in how they market it,” Smith said. “If you raise prices a little bit, but you’re offering a whole bunch more selection and a whole bunch more value, then sometimes the customers can be okay with it. We live in such a miraculous age in terms of technology, it’s really difficult to predict what the future may hold.”

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