How much more expensive can Netflix get? (NFLX)

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A new study from Tivo-owned technology company Digitalsmiths gives insights into Netflix’s pricing power and the strengths of the subscription video on-demand (SVOD) platform in the eyes of consumer.

Netflix’s subscriber growth disappointed in Q2 2016, and the company attributed this underperformance to the $2 price increase from $7.99 t0 $9.99 for its service and associated media coverage around this price hike.Digitalsmiths’ survey was posed to 3,114 respondents in the US, aged 18 and above.

Netflix’s most appealing features for consumers are price (58.9%), the ability to create custom profiles in a single account (55.1%), and its search functionalities (49%). The amount of respondents listing price as an appealing feature decreased by almost 4% since last year, which is not surprising given Netflix’s price hike.

On the other hand, the ability to create multiple profiles (enabling multiple users to use a single subscription) increased by over 2%. Taking these two movements together – price as an appealing feature going down, and custom profiles as an appealing feature going up – helps illustrate consumers' aversion to higher subscription prices.

Finding out just how much consumers would be willing to pay for Netflix is thus a valuable question. Nearly 30% of respondents are not willing to pay more than Netflix's price. About 40%, meanwhile, would acquiesce to an additional $2 to $5 hike from the current $9.99 monthly rate. This constitutes the largest segment of the survey’s population, demonstrating that Netflix still retains strong pricing power, despite the lackluster Q2 2016 performance.

As we move into more expensive price ranges, however, consumers become increasingly unwilling to spend for a subscription, suggesting that Netflix should not venture beyond the $15-a-month threshold.

Over the last few years, there’s been much talk about the “death of TV.” However, television is not dying so much as it's evolving: extending beyond the traditional television screen and broadening to include programming from new sources accessed in new ways.

It's strikingly evident that more consumers are shifting their media time away from live TV, while opting for services that allow them to watch what they want, when they want. Indeed, we are seeing a migration toward original digital video such as YouTube Originals, SVOD services such as Netflix, and live streaming on social platforms.

However, not all is lost for legacy media companies. Amid this rapidly shifting TV landscape, traditional media companies are making moves across a number of different fronts — trying out new distribution channels, creating new types of programming aimed at a mobile-first audience, and partnering with innovate digital media companies. In addition, cable providers have begun offering alternatives for consumers who may no longer be willing to pay for a full TV package.

Dylan Mortensen, senior research analyst for BI Intelligence, has compiled a detailed report on the future of TV that looks at how TV viewer, subscriber, and advertising trends are shifting, and where and what audiences are watching as they turn away from traditional TV. 

Here are some key points from the report:

• Increased competition from digital services like Netflix and Hulu as well as new hardware to access content are shifting consumers' attention away from live TV programming.
• Across the board, the numbers for live TV are bad. US adults are watching traditional TV on average 18 minutes fewer per day versus two years ago, a drop of 6%. In keeping with this, cable subscriptions are down, and TV ad revenue is stagnant.
• People are consuming more media content than ever before, but how they're doing so is changing. Half of US TV households now subscribe to SVOD services, like Netflix, Amazon, and Hulu, and viewing of original digital video content is on the rise.
• Legacy TV companies are recognizing these shifts and beginning to pivot their business models to keep pace with the changes. They are launching branded apps and sites to move their programming beyond the TV glass, distributing on social platforms to reach massive, young audiences, and forming partnerships with digital media brands to create new content.
• The TV ad industry is also taking a cue from digital. Programmatic TV ad buying represented just 4% (or $2.5 billion) of US TV ad budgets in 2015 but is expected to grow to 17% ($10 billion) by 2019. Meanwhile, networks are also developing branded TV content, similar to publishers' push into sponsored content.

In full, the report: 

• Outlines the shift in consumer viewing habits, specifically the younger generation.
• Explores the rise of subscription streaming services and the importance of original digital video content.
• Breaks down ways in which legacy media companies are shifting their content and advertising strategies.
• And Discusses new technology that will more effectively measure audiences across screens and platforms. 

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