Netflix to Increase Streaming Prices for New Customers Now, Existing Later
posted Sunday Apr 27, 2014 by Scott Ertz
It's numbers time for Netflix and this quarter saw a steady increase in the number of subscribers, bring its total to nearly 50 million worldwide. Earnings are also up, from $962 million to $1.06 billion, but overall profit was fairly flat, mobbing from $48 million to $53 million. This shouldn't be a surprise, however: more subscribers means more royalties for content, both existing and original.
Because of this, Reed Hastings, Netflix CEO, said that new customers can expect to see a $1-2 raise in the monthly subscription price. Ireland has already seen this price increase, starting in January, and Netflix says they saw very "limited impact," meaning very few customers left. This has left them with a positive feeling about the possibility of raising prices, something that has not officially happened for streaming-only customers since the plan's creation in 2011.
Now, that is 4 years of added content, original programming and increased speed and video quality, all without the price changing. We all knew that was not going to be able to last forever. Hastings said,
If we want to continue to expand, to do more great original content... we have to eventually increase prices a little bit.
These price changes will be different from the last time, however, with Netflix learning their lesson from the Qwikster debacle. As it turned out, splitting its DVD business away from the streaming service, with a new name and price to match, drove a lot of customers away. Now, with physical media rentals nearly irrelevant, a small price increase doesn't seem to scare them, or the market.
In fact, Netflix stock rose over 6% after the announcement. Apparently being able to pay for things is big for investors. It is important to note here, while the price increase will not affect current customers immediately, they will receive the price increase after "a generous time period," whose length is still unknown.
