Seeking Alpha

Netflix raising prices by $1/month; existing subs unaffected for 2 years

  • Netflix (NFLX) is raising the price of its basic U.S. streaming service for new subs by $1/month to $8.99/month. However, an e-mail sent out to many existing customers tells them their prices won't change for two years.
  • Netflix, only 3 years removed from the Qwikster debacle, stated last month it plans to hike prices for new U.S. and foreign subs by $1-$2/month (depending on the country) in order to finance more content spend. But it added existing subs will maintain their current pricing "for a generous time."
  • With Netflix possibly on its way to having 70M+ global streaming subs in two years - it currently has 46.5M - a $1/month hike could yield over $800M/year in extra revenue by the time it reaches Netflix's entire base.
  • NFLX -0.3% premarket.
Comments (3)
  • bobelouis
    , contributor
    Comments (100) | Send Message
     
    This is telling, the excuse that the additional fee rate will help buy programming is not evident to me. By grandfathering for 2 years, they have impeded their ability to raise any significant amounts for programming or profit. By raising the price by only $1, they are not going to raise a significant amount of additional revenue on the backs of new users. This seems to be saying we have no pricing power to the market, which was banking on it.
    9 May 2014, 09:47 AM Reply Like
  • Sakelaris
    , contributor
    Comments (1623) | Send Message
     
    This will raise their revenue over time, while creating a sense among existing customers that Netflix is trying to be fair. It sounds like a good compromise to me.
    9 May 2014, 11:24 AM Reply Like
  • koolrosh
    , contributor
    Comments (40) | Send Message
     
    I was really hoping for a 2$ increase. It's seems to me that they have the pricing power to do such a move. That would have increased Rev per user by 25% while keeping the price still under 10$
    9 May 2014, 11:53 AM Reply Like
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