You will be redirected back to your article in seconds

Netflix Price Hikes Could Lead Nearly 500,000 U.S. Subs to Cancel (Study)

Hundreds of thousands of Netflix subscribers may bail on the streaming service after the No. 1 subscription video service raises prices for long-term customers over the course this year.

About 27 million of Netflix’s U.S. streaming subs have either been subject to the price increase to $9.99 per month for the most popular two-stream HD plan, or will see it later this year, according to Nomura Securities analyst Anthony DiClemente. The price hikes could result in 480,000 customers cancelling their service, he estimated — while at the same time leading to about $520 million in additional annual revenue for Netflix.

“We note that this has long been a tenet of our investment thesis on the domestic business, as slowing subscriber trends are more than offset by increased monetization,” DiClemente wrote in a research note Monday. The analyst arrived at the estimates by assuming a 2% churn rate for subscribers on the receiving end of a $2-per-month price increase and a 1% churn rate for those whose plan would go up by $1.

Netflix ended the first quarter of 2016 with 81.5 million streaming subscribers worldwide, including 47 million in the States.

In the U.S., Netflix in May began raising the price of the standard HD service for those previously paying $7.99 monthly by $2, to $9.99 per month. Customers who signed up for the HD plan at $8.99 following the May 2014 price increase will be rolled over to $9.99 in October. Alternatively, the affected customers will have the option of continuing at $7.99 for a single-stream, standard-definition plan.

The company has told investors that it expects “modestly increased churn” because of the price changes this year, and said the higher subscriber fees will let it boost content spending — projecting that to rise from $5 billion this year to more than $6 billion in 2017 on a profit/loss basis.

“We will phase out this grandfathering gradually over the remainder of 2016, with our longest­-tenured members getting the longest benefit,” Netflix CEO Reed Hastings wrote in a the quarterly letter shareholders in April. “We are rolling this out slowly over the year, rather than mostly in May, so we can learn as we go.”

On Monday, DiClemente cut his price target on Netflix’s share price, from $125 to $115 per share, after reducing Nomura’s estimates for international subscriber growth in the second half of 2016. The analyst lowered his estimate for net new international subscribers to 2.35 million (down from 2.87 million) for Q3 and to 3.23 million (down from 4.04 million) for Q4.

“Thematically, international net subscriber additions headwinds may be somewhat offset by a better narrative surrounding revenue benefits from price increases in the U.S. throughout the remainder of 2016,” DiClemente wrote.

Netflix is scheduled to report Q2 earnings on July 18 after market close. For the second quarter of 2016, which is historically weak for the company, Netflix in April said it expects to add 500,000 subs in the U.S. and 2.0 million internationally; analysts are now forecasting net adds of 520,000 U.S. subscribers and 2.1 million overseas in Q2.

More Digital

  • League of Legends Championship Series North

    Ten Franchise Teams for 'League of Legends' North American eSports League Unveiled

    Hundreds of thousands of Netflix subscribers may bail on the streaming service after the No. 1 subscription video service raises prices for long-term customers over the course this year. About 27 million of Netflix’s U.S. streaming subs have either been subject to the price increase to $9.99 per month for the most popular two-stream HD […]

  • mozilla social vr

    Mozilla Lays Out Plans for Web-Based Social Virtual Reality

    Hundreds of thousands of Netflix subscribers may bail on the streaming service after the No. 1 subscription video service raises prices for long-term customers over the course this year. About 27 million of Netflix’s U.S. streaming subs have either been subject to the price increase to $9.99 per month for the most popular two-stream HD […]

  • IMAX-VR-Centre---Reception_800x500

    ‘Justice League’ VR: Imax VR Centers Get First Exclusive Title From Warner Bros.

    Hundreds of thousands of Netflix subscribers may bail on the streaming service after the No. 1 subscription video service raises prices for long-term customers over the course this year. About 27 million of Netflix’s U.S. streaming subs have either been subject to the price increase to $9.99 per month for the most popular two-stream HD […]

  • Comcast X1 the voice voting grid

    Comcast Viewers Can Vote for 'The Voice' Contestants Using Their X1 Remote Control

    Hundreds of thousands of Netflix subscribers may bail on the streaming service after the No. 1 subscription video service raises prices for long-term customers over the course this year. About 27 million of Netflix’s U.S. streaming subs have either been subject to the price increase to $9.99 per month for the most popular two-stream HD […]

  • lebron james - youtube

    LeBron James to Produce Uplifting High-School Basketball Docu-Series for YouTube

    Hundreds of thousands of Netflix subscribers may bail on the streaming service after the No. 1 subscription video service raises prices for long-term customers over the course this year. About 27 million of Netflix’s U.S. streaming subs have either been subject to the price increase to $9.99 per month for the most popular two-stream HD […]

  • Marvel Strike Force

    'Marvel Strike Force' Mobile Fighting Game Release Date Set for 2018 (Video)

    Hundreds of thousands of Netflix subscribers may bail on the streaming service after the No. 1 subscription video service raises prices for long-term customers over the course this year. About 27 million of Netflix’s U.S. streaming subs have either been subject to the price increase to $9.99 per month for the most popular two-stream HD […]

  • Iflix Makes Middle East Splash With

    Iflix Makes Splash in Middle East With First Arabic Original 'Tough Luck'

    Hundreds of thousands of Netflix subscribers may bail on the streaming service after the No. 1 subscription video service raises prices for long-term customers over the course this year. About 27 million of Netflix’s U.S. streaming subs have either been subject to the price increase to $9.99 per month for the most popular two-stream HD […]

More From Our Brands

Access exclusive content