Topic: Prices

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    ★ Netflix to Raise Prices For Two of Three Tiers of Service (Oct 5, 2017)

    Netflix has confirmed that it’s raising prices for two of its three tiers of service in the US, starting this month for new subscribers and in November for existing subs. Subscribers to the $8 bottom tier won’t see an increase, but the most popular middle tier will go from $10 to $11 per month, while the premium tier will see a $2 bump from $11.99 to $13.99. I’m a bit surprised by this increase coming so soon after the company finished implementing its last price increase last year. The company’s current average revenue per paid US streaming subscriber is right around $10, and went up $2 exactly in keeping with the last price increase, suggesting that the base is dominated by that middle tier and that subscribers to the other two plans largely balance each other out. With the bigger bump to the premium tier, it’ll be interesting if we see average revenue per user rise more this time around, especially as 4K adoption increases.

    I did some analysis for Variety in May last year on the last price increase and reached the conclusion that costs per subscriber were actually falling and price increases were largely about continuing to drive US margins up. That increase caused lower subscriber growth for a few quarters, though the impact was more closely tied to the timing of the announcement than the implementation for individual existing customers, which validates Netflix’s decision to push out the increase quickly this time rather than staggering it. Since I did that analysis, however, Netflix’s domestic streaming cost of revenue per subscriber has risen, which means this increase is more honestly about covering rising costs than the last one, though cost haven’t risen by nearly as much as prices will go up – monthly cost per sub has gone up by about 23 cents over the past year, so less than a quarter of the $1 price increase on the most popular tier. I wouldn’t expect as large an increase in churn this time around given that it’s a smaller increase in price, but it does mean that Q4 subscriber growth numbers in the US will take a hit and be a little lower than they would otherwise have been.

    via Mashable

    US Wireless Carriers Claim Less Aggressive Approach to iPhone Discounting (Sep 14, 2017)

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    Various Additional Details About Apple’s Announcements Dribble Out (Sep 13, 2017)

    As is often the case, various details are dribbling out today about the many announcements Apple made yesterday, so here’s a quick roundup. Firstly, CNBC reports that Apple quietly hiked iPad Pro prices by $50 yesterday without making any changes to the hardware – that’s likely because flash memory prices have been rising dramatically recently, putting pressure on both smartphone and PC makers (but driving Samsung’s highest ever profits).

    Secondly, MacRumors reports that the new desktop version of iTunes drops the iOS App Store entirely, meaning it’s now just for buying and consuming content that can actually be used on a Mac or PC, further untethering the iPhone from the computer. I would guess very few purchases were made this way in recent years anyway given how many people likely sync and backup to iCloud.

    Thirdly, the Wall Street Journal confirms a detail I pointed to during yesterday’s keynote: Disney is a holdout from the 4K movies that will be available through the iTunes Store, likely because it wouldn’t go along with the pricing Apple wanted. In the end, there was no clean answer on the pricing question I posed in my earlier piece on the negotiations: Apple won with some studios and lost with others, notably Disney, but they may still come around eventually.

    Fourth, MacRumors confirms a rumor that wasn’t confirmed on stage yesterday – the new iPhones will support fast charging if charged with MacBook rather than iPhone power adapters, charging to 50% in half an hour, which will be a nice bonus for those that own MBP chargers but won’t affect most others (I find that an iPad charger already generally does a pretty good job with faster charging).

    Lastly, Business Insider reports on Apple Watch LTE battery life, which is one hour for calls or four hours for exercising using the GPS and LTE while untethered from an iPhone. That should be perfectly adequate for the most likely use cases, which are exercising without an iPhone or taking the odd call while the phone is out of range while at home, for example. The Watch with LTE certainly isn’t intended to be used all day without a phone, and battery life certainly won;’t support that use case.

    via CNBC (iPad Pro), MacRumors (iTunes)WSJ (4K movies), MacRumors (fast charging), Business Insider (Apple Watch battery life)

    Nest Unveils Cheaper, Slightly Less Capable Thermostat E (Aug 31, 2017)

    Nest unveiled its first new thermostat product in two years today in the form of the Thermostat E, a cheaper ($169 vs $249) and slightly less capable alternative to its core product line. The functionality is very similar, with only a slight reduction in compatibility with HVAC systems (Nest says 85% versus 95%) and one other minor missing feature relative to its core product. But the new thermostat is also redesigned, with a much lighter and arguably less distinctive look, apparently intended to blend in better to light colored walls and rooms rather than sticking out as an intentional piece of striking design like its first product in the category. Though the price of the original thermostat has certainly been a sticking point for some, especially those who need several units – the reality is that price is only one of many factors holding back the smart home. Far more important in many ways is the fact that most people find installing and managing these things intimidating and therefore managed services rather than DIY solutions are going to be the key for the vast majority of users, and Nest really isn’t doing anything in that direction. Meanwhile, Nest’s slow pace of new product introductions continues: it has three product lines, none of them newer than 2014, and its core thermostat and Protect products haven’t been updated in two years (see this image for an overview of its product launch history). The camera products have received most of the attention in the last couple of years, but there’s been no new organic product category from Nest since 2013. (See the Smart Home is Stuck narrative linked below for more context on all this)

    via Nest

    Sony Discounts PlayStation VR Gear by $50 (Aug 29, 2017)

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    Microsoft Offers Additional Details on Mixed Reality Headsets (Aug 28, 2017)

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    ★ Amazon-Whole Foods Deal to Close Monday, Lower Prices to Follow (Aug 24, 2017)

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    HTC Permanently Cuts Vive Price to $599 to Close Price Gap with Oculus Rift (Aug 21, 2017)

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    T-Mobile Launches Budget Smartphone and Offers Others on Lease Programs (Aug 9, 2017)

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    Oculus Offers Six-Week $200 Discount on Rift Plus Controller Bundle (Jul 10, 2017)

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    Sony Raises Monthly Price of Playstation Vue Packages by $10 (Jul 7, 2017)

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    Samsung Galaxy Note8 Reported to Cost 999 Euros / $900 at September Launch (Jun 23, 2017)

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    Amazon Wisely Nixes its Unlimited Cloud Storage Service for Consumers (Jun 8, 2017)

    I occasionally see Apple criticized for not simply giving away iCloud storage, and some of those critics will occasionally point to Amazon’s generous offering of unlimited storage for $60 per year as evidence that Apple could do more in this direction. However, Amazon has now announced that it’s discontinuing the offer and moving entirely to tiered pricing along the lines of what others offer. I can’t say I’m surprised – unlimited anything is always a dangerous business model, because it will always attract the heaviest users, who will massively skew the overall economics. That’s true for all-you-can-eat buffets, unlimited wireless data plans and unlimited cloud storage. That’s not to say neither Amazon nor Apple shouldn’t be generous in the amount of storage they provide at various priced tiers, but it is to say that giving away either large amounts of storage for free or unlimited amounts for a fixed price are both bad ideas. Charging at least a nominal amount for storage teaches consumers that it has a cost (which across hundreds of millions of users can be substantial), while capping usage at various price tiers avoids abuses of the system. Unlimited as a pricing strategy is always much more about peace of mind that actual usage anyway – literally no-one needs unlimited anything – everyone’s usage tops out somewhere, and providing the right pricing and flexibility between offerings should meet all use cases across the spectrum. Despite this change, both Amazon and Apple are now offering pretty generous allowances of storage at various reasonable prices, which is the way it should be, and the prices per GB will continue to come down over time, as they also should.

    via USA Today

    Spotify Offers 50% Discount to Subs Paying with Capital One Cards (May 10, 2017)

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    Apple Makes iMovie, GarageBand, and iWork Apps for Mac and iOS Free for All Users (Apr 18, 2017)

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    Sprint Ditches 50% Off Promotion and Focuses Exclusively on Unlimited (Apr 6, 2017)

    There were reports earlier this week that Sprint was ditching its 50% off promotion, which has run since 2015, and it has now confirmed that news. Instead, Sprint is now focusing exclusively on unlimited services, ditching its tiered plans as well, and offering a $10 per line discount through June 2018 on new plans, making them in some cases 30-40% cheaper than equivalent Verizon or AT&T plans. Sprint’s 50% off plan became untenable when the two larger carriers reintroduced unlimited plans, because in practice under the promotion Sprint had seen most customers keep their spend at the same level as at their previous carrier while moving to a higher speed tier, which isn’t possible when switching from unlimited, meaning Sprint really would be charging 50% less for the same service. Instead, then, it’s competing on price in a less dramatic way going forward, but it’s worth remembering that price discounts in wireless have a direct correlation to perceptions of network quality. As such, these ongoing price discounts are a recognition that Sprint can’t be competitive unless it’s charging quite a bit less than competitors, because of poor perceptions of its network, perceptions that are unlikely to change at its current historically low network investment levels.

    via Sprint

    Apple Announces New Low-End iPad, Confirming Change in Strategy (Mar 21, 2017)

    Apple today updated its online store and issued a press release around a new 9.7″ iPad, confirming a change in strategy which seemed apparent when the 9.7″ iPad Pro launched but wasn’t made explicit until now. The new iPad drops the Air branding, and offers specs a year or two behind the iPad Pro line, while reducing the price to the lowest in Apple’s iPad lineup, at $329 (the only iPad mini available now is the 128GB model, which starts at $399, meaning that for the first time it’s cheaper to buy the new 9.7″ iPad than the newest iPad mini). What we have now, then, is a clear bifurcation between the iPad Pro, which is the latest and greatest with high-end specs, new features, and accessories like Pencil and the Smart Keyboard, and the more basic and low-end iPad. The iPad Pro is therefore not just the iPad for people who want to replace their laptop, but also the best iPad for everyone else. The iPad, then, becomes the low-cost alternative, the one for people with simpler needs, for giving to kids, and so on. That’s going to do interesting things to average selling prices, which had gone up slightly with the launch of the iPad Pro line and will now come down, but also to Apple’s competitiveness in a price band where it really hasn’t played before, expanding its addressable market. This new iPad is effectively the equivalent of the iPhone SE, taking older innards and wrapping them in new branding to bring the price down to a new level, and I suspect that – like the iPhone SE – it will indeed bring the device to new people. However, I suspect it’ll take quite a bit more share of the overall market than the SE has in iPhones.

    via Apple

    Verizon: Unlimited Data Plan Lures Sprint Customers – Fortune (Mar 8, 2017)

    The reintroduction of unlimited plans by AT&T and Verizon in February makes this one of the least predictable periods in the recent history of the US wireless industry. The presence of unlimited plans at Sprint and T-Mobile and their absence at the two larger carriers has been a defining characteristic of the market for so long that the rapid turnaround is likely to lead to quite a bit of change in competitive dynamics and growth rates. Here’s the first evidence of that in the form of comments from Sprint’s CFO at an investor conference that churn will be stable rather than down this quarter as originally anticipated. T-Mobile hasn’t really commented yet, but has been introducing a set of promotions throughout the second half of the quarter in an attempt to keep its own growth going at previously expected rates. The impact in Q1 will actually be a little muted because the changes didn’t kick in until halfway through the quarter – it’s in Q2 and the rest of the year where we’ll see the biggest impact, though the exact scale and nature of that impact is still up in the air.

    via Fortune

    Oculus Drops Price of Rift and Controllers by $100 Each (Mar 1, 2017)

    I’ve just had a little debate with myself (and with some others on Twitter) as to which site to link to for this news – lots provided essentially the same information in my Twitter feed at roughly the same time, and I was left with a choice of a site with a paywall, a site with egregious auto play videos, or a site with more superficial coverage. The news itself is interesting – Facebook/Oculus is reducing the price of both the Rift and the controller by $100 each for a total discount of $200 and a new combined price of $598, which puts it below the price for the $799 HTC Vive, but above the $399 price of the Playstation VR. The combined price of a console or PC plus headset is still lowest for Playstation by quite a distance, helping explain why the latter is selling so well, especially with a large installed base of consoles. Oculus insists it’s not reducing the price because of poor sales, and it’s been saying for months Oculus sales wouldn’t be material to Facebook’s overall business for years, so there’s some credibility to its claim that it’s just executing on a longer-term plan here. Even Sony’s nearly 1 million sales are still very small in the context of any other mainstream consumer electronics category, which is a useful reminder of VR’s relative immaturity. But lower prices will help accelerate things a bit, as well installment plans like the one HTC announced this week.

    via Techmeme (alternatively, direct links to FT, USA Today, and Business Insider)

    Apple iPhone Price Under Pressure as Buyers Seek Cheaper Devices – Bloomberg (Jan 26, 2017)

    This piece suggests falling ASPs due to iPhone buyers plumping for older models like the 6S rather than the new iPhone 7 models, but only quotes one analyst at Barclays to back up the claim. We’ll know soon enough what the ASP numbers for the December quarter look like, but they did fall this past year relative to the year earlier, in part because of the iPhone SE launch. It’s certainly also true that people are hanging onto phones longer, because they’re more capable, and that new installment plans from US carriers make the price of phones more transparent than the old subsidy model, and reduce the monthly cost once a phone is paid off. For all these reasons, I’m definitely seeing longer upgrade cycles for smartphones, but I see very little evidence that people are buying older phones new – in fact, all my conversations with carriers suggest the opposite – moving from an upfront cost to a monthly cost is driving people to higher-priced phones. In addition, the mix between the 7 and 7 Plus looks to have moved in favor of the larger device relative to earlier models, and that and interest in the jet black finish will also drive up ASPs. Color me skeptical at this point.

    via Bloomberg