Will Netflix's Next Move Be A Price Cut?

Netflix (NASDAQ:NFLX) has pushed through a lot of price hikes in recent years. The cost of its most popular streaming plan has gone through four increases over the past five years, with the largest of the moves being a $2-a-month bump earlier this year. The platform's monthly rate has gone from $7.99 to $12.99 since early 2014, a 63% surge in the process.

This year's springtime hike was likely ill-advised. Apple (NASDAQ:AAPL) and Disney (NYSE:DIS) would go on to unveil new premium services priced at roughly half of Netflix's monthly ransom. Outside of HBO Max -- slated to launch at $14.99 a month in May -- Netflix now finds itself at the high end of the pricing range for stand-alone streaming platforms. It's a tricky place to be for a longtime market darling that is now surprisingly vulnerable after falling short of its subscriber guidance in back-to-back quarters.

Getting a read on the cancellations

There's a lot of information to be gleaned from folks kissing Netflix goodbye, and the Kill The Cable Bill blog recently teamed up with an unaffiliated third-party data analytics blog to take a pulse on the folks who have been recently cancelling the leading premium service. The good news is that just a quarter of the folks surveyed have no intention of returning to Netflix in the future. Breaking up with Netflix is easy to do, and so is getting back together when the urge returns.

However, the most problematic nugget in the research is that nearly half -- 49.4% -- of those polled cited this year's price increase as a key factor for cancellation. The hike was named more often than any other reason including lack of interesting content (42%), other streaming services (40%), and not enough movies (22%).

Netflix at $12.99 a month may seem like a bargain compared to cable and satellite plans, but is it still a value with so many services priced in the single digits? Apple TV+ at $4.99 a month isn't generating a lot of buzz given its limited content, but Disney+ at $6.99 is a place that fans of Marvel, Disney, Pixar, and Lucasfilm can get lost in for hours at a time.

With Apple offering buyers of its devices a free year of access and Disney giving aggressive discounts to folks willing to pay ahead for at least a year, the value proposition is even more diluted than the already low monthly rates for the new offerings. Netflix isn't likely to drop its prices, but it's not going to raise its prices anytime soon, either. It wouldn't be a surprise if it tried to lock in subscribers with prepaid plans offering discounts for a year or more.

The desperation may intensify if Netflix falls short of its subscriber goals during the current quarter. Misses are rare, and the current back-to-back fumbling is even more of an anomaly. Another disappointing period of growth -- at least when it comes to its domestic magnetism -- and it may not be up to Netflix if it lowers prices. These are interesting times, and one of the hottest tech stocks over the past decade has never had as much to prove as it does right now.

This article originally appeared in the Motley Fool.

Rick Munarriz owns shares of Apple, Netflix, and Walt Disney. The Motley Fool owns shares of and recommends Apple, Netflix, and Walt Disney and recommends the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, long January 2021 $60 calls on Walt Disney, and short January 2020 $130 calls on Walt Disney. The Motley Fool has a disclosure policy.