Netflix Plans Increased in US, India Prices Unlikely to Change
Netflix is raising its US prices by 13 to 18 percent, its biggest increase since the company launched its video streaming service 12 years ago.
Its most popular plan will see the largest hike, to $13 per month from $11. That option offers high-definition streaming on up to two different internet-connected devices simultaneously.
The extra cash will help to pay for Netflix's huge investment in original shows and films and finance the heavy debt it has assumed to ward off rivals such as Amazon, Disney and AT&T.
While subscribers might bemoan a bigger monthly bill, Wall Street cheered, sending Netflix's shares up by 6.5 percent Tuesday.
This marks the fourth time that Netflix has raised its US prices; the last hike came in late 2017.
Previously, Netflix had continued to offer a basic, $8-a-month streaming plan while raising rates on more comprehensive plans with better video quality and options to watch simultaneously on different devices.
The new prices will immediately affect all new subscribers and then roll out to existing customers during the next three months. Customers in about 40 Latin America countries where Netflix bills in US currency will also be affected, excepting key international markets such as Mexico and Brazil.
Higher prices could alienate subscribers and possibly even trigger a wave of cancelations. For instance, Netflix faced a huge backlash in 2011 when it unbundled video streaming from its older DVD-by-mail service, resulting in a 60 percent price increase for subscribers who wanted to keep both plans.
"This is a more aggressive move than (investors) were expecting," said Moody's analyst Neil Begley said. "It shows Netflix is pretty confident that is still has some pricing power in the US."
That confidence flows from the programming line-up that Netflix has built since it began focusing on exclusive shows five years ago. The acclaimed hits have included "House of Cards," ''Orange Is The New Black," ''Stranger Things," ''The Crown" and, most recently, the film "Bird Box."
Consumers also have an increasing array of other streaming options .
Amazon offers a streaming service as part of its Prime shipping program for $13 per month, or $120 for an annual membership. Hulu sells an ad-free service for $12 per month. AT&T's WarnerMedia unit plans a broader streaming service this year centered on HBO. Walt Disney is gearing up to launch a streaming channel this year.
With Apple also widely expected to join the video-streaming fray, the competition for programming is enabling top directors, writers and actors to charge more for their talents. That has intensified financial pressure on Netflix, which hasn't been bringing in enough money to pay for all its programming and other business expenses.
The Los Gatos, California, company had accumulated nearly $12 billion in debt before borrowing another $2 billion in an October bond offering. Moody's Begley predicted the price increase will enable Netflix to stop burning through cash by 2022 or 2023, assuming it can reach 200 million worldwide subscribers within the next three years.
Concerns about the stiffening competition and Netflix's ability to sustain its current leadership in video streaming have caused the company's stock price to plummet from peak of $423.21 reached last June.
Investors reacted enthusiastically to Tuesday's news, signalling their belief that the price increase won't significantly slow Netflix's subscriber growth. The company's stock surged $21.70 to finish at $354.64, its highest closing price in nearly three months.
(The Quint is now available on Telegram. For handpicked stories every day, subscribe to us on Telegram)