Overreaction on Netflix

On Monday, Netflix has reported profit of 57% and on Tuesday the shares of the same plunged by 10% and more but recovered to 5% down to the last day. This fall came in the stock because the Netflix has recently increased the prices. In a communication to the analysts, the company executives said that in the coming duration the subscription growth will be slow as the prices of the Netflix has been updated.

It is the process of economy as if the prices are increased then it impacts as lower demand. In the beginning of the current month, Netflix informed about its update in the prices. So person who wish to access streaming and DVDs will charged $16 instead of $10 per month.

It is a common thing that the increase in the prices will be criticized from the customers side as they have to pay more from their pocket but is one sees the depth of the current prices then it is are still low. As the Netflix is having a huge customer base for its DVDs and online movie streaming. The hike in the price is a result of the expiry date to the discounts which was offered to stream the video with DVD subscription.

The market trend is shifting from the DVDs to online streaming. The Netflix competitors like Google and Amazon are placing themselves in direct competition with the Netflix. Now, the Walmart too is planning to enter in this domain of online streaming. Netflix’s increase is also because it has to pay more for the getting the rights of the movies and TV shows.

Netflix is the starter and the leader of the business because of its low rates for the subscription. The competitor seems to pay the same rates too. But here it has to be seen that how Netflix compete with the competitors who are having sound financial strength.