Netflix: the pricing-power test
Netflix raised prices again and subscriber growth did not slow. That is the definition of pricing power, and it explains the multiple. The ad tier adds a second lever. What I'm watching is whether the next increase gets the same reaction.
Sample research report used to test the layout. Delete before launch.
Thesis
The only streaming service that raises prices without losing customers. Combined with a maturing ad business and a content budget that has stopped growing faster than revenue, margins have a long runway.
Catalysts
- Advertising revenue crossing a level where the company reports it separately.
- Live events, which bring in viewers who were not subscribers.
Risks
- Saturation in the largest markets.
- A price increase that finally triggers cancellations.
What would prove me wrong
Net additions turning negative after a price increase. Then the pricing power is spent and the multiple is too high.
Position
Half position, held since the autumn.