Two separate studies shed some interesting light on how Netflix’s pricing strategy and recommendations engine affect the video-streaming service’s finances. First, there’s a study from Nomura Securities analyst Anthony DiClemente, reported in Variety, on the impact of Netflix increasing its most popular two-stream subscription plan by $2 to $9.99 a month. DiClemente estimates that the change will generate $520m in extra annual revenue for Netflix, but will lead to 480k customers cancelling their subscriptions. Food for thought for music-streaming services mulling price changes in the years ahead. The second study comes from within Netflix – its VP of product innovation and chief product officer – quantifying the value of the service’s recommendation algorithms. Topline: the execs calculate that they save Netflix $1bn a year by ensuring it makes the most of its $6bn content spend, putting the right shows in front of the right viewers – which in turn leads to “meaningful increases in overall engagement with the product (e.g., streaming hours) and lower subscription cancellations rates”. Again, food for thought if we’re trying to think about, say, the value of The Echo Nest to Spotify.
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Tools: Kaiber
In the year or so since its launch, AI startup Kaiber has been making waves,…