Netflix Determines Pricing Of Its Service Based On Local Piracy

Netflix revealed in a quarterly Earnings call, that its strategy is to determine the price of its service based on local piracy rates, so it can better compete in places where piracy is rampant.

With nearly 60 million subscribers globally, Netflix is a giant in the world of online video entertainment. In terms of providing access to popular TV-shows and movies, the company’s biggest competitor is piracy. Netflix says it understands that destroying piracy is an endless and perhaps fruitless battle, so it will instead view piracy as normal competition and adjusts its monthly price point accordingly.

Piracy is a governor in terms of our price in high piracy markets outside the US,

We wouldn’t want to come out with a high price because there’s a lot of piracy, so we have to compete with that,

So far, Netflix’s strategy, both on the pricing and content side of the equation, seems to be working exceedingly well. Not only is Netflix doing well in countries with traditionally high piracy rates, its subscriber rate continues to trend upwards dramatically. In the last quarter alone, the company has added 4.9 million new subscribers, a figure which is 20% higher than Wall Street analysts were expecting.

Netflix is also trying to use piracy to its advantage by bringing some of the more popular pirated shows in order to get a better grasp on which shows are worth purchasing and bringing into the Netflix umbrella.

Source: Reuters