Netflix to Raise Prices $1 to $2 per Month for New Subscribers

Netflix Raising Prices: $1-$2 Increase Per

Netflix announced that it expects to increase the cost of its streaming-video service by one or two dollars monthly for new subscribers later in the second quarter of 2014.

“We have greatly improved our content selection (in the U.S.) since we introduced our streaming plan in 2010 at $7.99 per month,” the company said. “Our current view is to do a one- or two-dollar increase, depending on the country, later this quarter for new members only.”

SEE ALSO: Netflix Keeps Up Growth Spurt, Adding 4 Million Subscribers in Q1

Netflix noted that existing members would remain grandfathered in at current pricing (for example, $7.99 per month in the U.S.) for a period of time — either one or two years — which the company characterized as “generous.”

The price increases “will enable us to acquire more content and deliver an even better streaming experience,” Netflix CEO Reed Hastings and CFO David Wells wrote in their Q1 2014 letter to shareholders.

Netflix said it decided to raises prices after it saw “limited impact” from its January 2014 price increase for new members in Ireland (from €6.99 to €7.99), which included grandfathering all existing members at €6.99 for two years.

In 2011, Netflix effectively raised prices by splitting apart streaming and DVD-by-mail plans, amounting to a 60% price increase for customers who previously paid for $9.99 a combined plan that offered unlimited streaming and one DVD out at a time. That resulted in a hit to its subscriber totals. But the new price increases are different because they would apply only to new subscribers. Netflix is seeking to “grandfather people cleanly” this time around, Hastings said in discussing Q1 2014 results, adding that Netflix’s near-term revenue will not increase substantially from the new monthly streaming prices.

Last year, Netflix tested two new tiers of services at different price points: a $6.99-per-month option with a single stream (one device at a time) and standard-definition video and a $9.99 monthly option that provides up to three simultaneous HD streams. The new price increases are independent of such usage-based tiers, which Hastings said Netflix is continuing to evaluate.

Hastings, in discussing Q1 2014 results in a webcast Monday, downplayed Netflix’s competition with Amazon.com’s Prime Instant Video, which is available to customers of the e-retailer’s program for free two-day shipping on products. Consumers are viewing Netflix and Amazon offerings as “separate channels” that provide different programming, he said.

“I’m a Prime member, and most Netflix employees are Prime members,” he said. “It’s very much not a zero-sum game… we’re both building this ecosystem around Internet video.” Amazon recently raised the price of Prime in the U.S. to $99 annually, up from $79.

Netflix is available through Amazon’s recently launched Fire TV set-top, Hastings noted, and is working to support the device’s voice-enabled search feature for Netflix content in the future.

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  1. How does Netflix fit in with Comcast? I have a TiVo but haven’t signed up with Netflix because Xfinity is constantly raising my amount to pay. Am I supposed to pay them or pay you separately?

  2. Advantus says:

    I wonder will this extra revenue now allow Canadian customers to see all the content that has been exclusive to US customers? We see a small portion of all the available shows in the US on Netflix.

  3. still much more affordable than cable…which I haven’t had since 2006.

  4. Aimee says:

    This doesn’t bother me BECAUSE I have seen improvement over the last few months. My streaming speeds are better and their streaming content has increased. As long as we see results from these price increases I won’t mind.

  5. lakawak says:

    And that’s just with a couple original series. If they tried to REALLY compete with the cable networks with a full slate of original programming, it would have to price itself the same as HBO, if not more.

  6. JoeR says:

    VARIETY just reported that, in just the first quarter, Netflix added 6.25 million new subscribers. They had only expected 2.25 million. So that’s a lot of additional revenue and you’d think they’d be thrilled. . And yet they STILL need to raise the rates? I’m all for making profit, but this exemplifies corporate greed at its most indulgent.

    • Miffy says:

      It’s not necessarily just greed. Netflix has greatly increased spending on original programming.

    • Sergio says:

      I’m not sure it’s about greed entirely, although that’s a part of it. If you look at Netflix’s revenue, and compare it to their profits, you will see that the vast amount of money they take in is spent on content licensing.

      • JoeR says:

        I did notice and understand that. I’d have assumed that was taken into account, given their projections. As well as the increased competition from Amazon, et. al. Given the revenue was three times as much as expected, one would think that would go towards content acquisition, as opposed to getting it from subscribers.

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