Price low at first

Wall Street Journal reports that Netflix allegedly (based on third party research) had the most new subscribers signing up since 2019 the last week of May. This includes the top during the pandemic. It coincides with Netflix tightening the screws on account sharing in the US.

This is an example of a later stage action to drive revenue for a mass-market service.

Netflix started at $7.99 per month for the service, added more content to increase value and user growth, added additional tiers (number of steams and technical quality) at higher prices to increase average revenue per user, made price increases, as subscriber growth slowed added combined paid and as-supported to drive volume for more price sensitive viewers, and now trying to lower account sharing.

For companies with both the time to grow and a great mass-market product it is probably the best approach, which explains why Disney and others have also had low initial pricing for streaming. The question is if they can create must-have products that can compete.

It is also a reminder to cut startups some slack during an initial phase of subscriber growth for not monetizing fully. For great products with low churn that is simply a good strategy.

Lenny’s Podcast interviews Gustav Söderström (Spotify)

Great 1.5 hour interview on product development, product strategy, AI, organizational structure/autonomy in decision making, the challenge with redesigning a popular feature used for a long-time and much more with Gustav Söderström on Lenny’s Podcast.

Two interesting, but not new, points:

  1. Spotify went from 7 person development ‘squads’ to about 20 person teams per manager. The employees per manager went up significantly.
  2. When you redesign a service or popular page (like Spotify did with the homepage), you will get a lot negative feedback. One reason is that you change the environment for old users, which means they don’t find things as easily. But you might also have broken things. One way to understand what is going on is to compare new user cohorts with old user cohorts.

Just a great listen for founders, management and employees.