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Netflix Bows Single-Screen Streaming for $6.99

30 Dec, 2013 By: Erik Gruenwedel

SVOD pioneer ends 2013 eliminating the ‘poison pill’ shareholder rights plan

Netflix is quietly offering newcomers to the rental service the option of a $6.99 monthly subscription that allows access to the service on one screen at a time.

The new plan, which is accessible on Netflix’s homepage, is almost 13% less than the current $7.99 monthly fee that allows streaming on up to two screens at a time. Netflix also offers a $9.99 plan for unlimited streaming on up to three devices; $11.99 for a family plan allowing viewing on up to four screens at a time.

Rival Amazon Prime Instant Video charges members $6.67 monthly when dividing its $80 annual subscription by 12.

The lower-priced one-screen subscription is not available to existing members, but could be easily accessed simply by canceling an existing membership. Netflix historically adds a significant number of new subscribers in the fourth quarter via gift cards. In the fourth quarter 2012, it added 2 million subs — double the previous quarter.

A Netflix customer service representative said the $6.99 monthly plan was being rolled out as a test for new subscribers only, and that expansion of the plan to existing subscribers would be determined later.

Wedbush Securities analyst Michael Pachter believes the lower price point could also be an attempt by Netflix to thwart scuttlebutt Amazon will soon launch a standalone streaming service priced below Netflix.

Should Amazon offer a standalone streaming service, Pachter suggests it’s reasonable to expect that it would appeal to the value conscious Netflix subscriber, and result in a significant amount of cannibalization.

“Our negative thesis on Netflix has been based in part on increasing competition from Amazon, and we believe that if Amazon were to try to compete by offering a standalone streaming service, it would likely do so at a price point significantly lower than Netflix's $7.99,” Pachter wrote in a Dec. 30 note. “Amazon could price streaming on a standalone basis at $4 or $5 per month and still come out ahead, due to little incremental content expense.”

Meanwhile, Netflix appears to be putting the brakes on the number of streaming titles made available to subscribers in the New Year. Netflix, which spent about $2.7 billion in 2013 licensing content from third parties — compared to about $1 billion by Amazon Prime Instant Video — is dropping four times the number of titles from its streaming service as it is adding, according to Pachter.

Notable titles disappearing from Netflix entering the new year include Titanic, Braveheart, Scary Movie, Transformers: Dark Of The Moon, Alice In Wonderland (1951), Capote, Immortals, and Seed of Chucky, among .

“We have long postulated that Netflix would respond to ever-higher content costs by weeding out less popular titles, and consistent with this view, the number of subtractions from the Netflix streaming catalog is roughly four times the number of additions, as Netflix attempts to keep content costs under control,” Pachter wrote in a Dec. 30 note.

He believes Amazon could bid for the titles Netflix is eliminating — a strategy it employed last year when Netflix dropped Nickelodeon content, including “SpongeBob Square Pants.”

Finally, Netflix, in a Dec. 30 regulatory filing, said it was dropping a shareholder rights “poison pill” proviso. The plan was enacted in late 2012 after maverick investor Carl Icahn became Netflix’s largest individual shareholder. Any attempt by Icahn or other party to enact a hostile takeover of Netflix would flood the market with newly issued shares; thereby rendering the parties’ stake mute.

About the Author: Erik Gruenwedel

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