Netflix has kicked off a new promotion that offers a standard-definition streaming service for $6.99, or $1 less than the popular $7.99 basic service, AdWeek reports. There seem to be two caveats beyond the standard definition limitation: The lower price is offered only to new customers and it only supports streaming to a single device at a time.
These are pretty harsh restrictions for a service that yields 12 dollars of annual savings compared to the more lavish $7.99 option supporting multiple screens and HD streaming. Apparently Netflix is targeting true penny-pinchers with this move. The company is known as the ultimate tweaker — Netflix is always busy testing different user interfaces, menu systems and content promotion algorithms.
This $1 discount may well be one way to gauge consumer response to slight price variations that are linked to service quality changes.
Many investors believe Netflix’s share price is wildly overvalued and the company is going to be in trouble if it cannot find a way to extract more revenue from its current users. In this context, it’s interesting that Netflix is experimenting with a pricing model that would expand its user base at the cost of lower revenue; many analysts expect the company to head in the opposite direction and try to find premium features that would seduce consumers into paying extra.