Netflix Quietly Lowers Prices in Over 100 Markets, Driven by Strong Dollar and Price Competition

Netflix Stock at a Glance

• Current Morningstar Fair Value Estimate: $315
• Netflix Stock Star Rating: 3 stars
• Economic Moat Rating: Narrow
• Moat Trend Rating: Stable

Netflix Company Update

Netflix NFLX dropped prices in over 100 countries and territories effective Feb. 23 according to Ampere Analysis. The magnitude of the price drop differed by both market and plan with the basic plan receiving the largest decreases, from 20% to almost 60%. The affected areas are spread across the world and are largely emerging markets.

However, Netflix did not make changes to some of the largest emerging markets such as India, Brazil, and Mexico. We are maintaining our $315 fair value estimate as we have long assumed that Netflix would need to lower pricing outside of the U.S. and Western Europe to remain competitive.

Most of the now-lower-price countries do not have localized pricing, but rather set prices in U.S. dollars—Ampere identified only 10 markets with local currency pricing (Ecuador, Croatia, Egypt, Kenya, Morocco, Indonesia, Thailand, Malaysia, the Philippines, and Vietnam). Thus, we view most of the pricing changes as an attempt to offset the impact of the strong dollar.

Netflix Responds to a Competitive Market

We also think that the level of current or expected competition from services with much lower pricing played a major role in these changes—and likely the dominant role in markets with local pricing. For example, Disney+ Hotstar serves three of the five Asian countries with local pricing and the service is expected to launch in a fourth (Vietnam) this year. The Philippines, the fifth, is served by Disney+.

Even against the lowered pricing, the Disney platforms still have a significant price advantage. In Indonesia, Hotstar costs IDR 39,000 per month or IDR 199,000 annually versus Netflix’s updated monthly pricing of IDR 65,000 (basic), IDR 120,000 (standard), IDR 186,000 (premium), and IDR 54,000 (mobile).

The considerably more limited Netflix mobile plan costs 38% more than the monthly Hotstar plan. While the lowered prices will help improve Netflix’s competitiveness, the firm may need to drop prices again if Disney remains aggressive in keeping its pricing low.