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

Netflix headquarters
Courtesy of Netflix

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.

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Netflix

Netflix Standard Plan Rising to $10 for All Subs Starting in May

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.

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  1. Kymor23 says:

    Just cancelled my account, I get more off of my firestick, and tablet, why pay more? #Netflix=Obselete

  2. srgmac says:

    Just cancelled my account — they notified me my rate would go up in October.
    No thanks…They want us to pay more yet they are not doing more to get quality shows and better movies.
    Whereas HBOGo has some of the best movies and shows ever to exist…And for the most part, they don’t drop shows or movies from their catalog after a few months either.
    It’s a bit more than Netflix but IMHO the quality of the content is just so much higher.
    I have been subscribing to both for the past year but now with the price increase, Netflix just made my decision for me.
    I doubt it will affect them in their pockets, like the analyst said, it will probably generate even more revenue for them, despite that nothing has changed in terms of the content they are providing, etc.

  3. Johnny says:

    I cancelled and so did my dad. $2 is not a large amount but 20% is. It made me take pause and think about how much I valued it. When the cost was hidden as a recurring charge to my credit card I just paid it even though I was mad they got rid of most of the movies I wanted to watch (some I was in the middle of). When I saw the fee presented again in front of me and it was $10 a month for something I barely watch, well the choice was easy. I’ll go for trials on Hulu and Prime to see if they are worth it. But as for Netflix, I don’t see value there anymore.

  4. Sammy says:

    There are other choices for family friendly streaming… like PureFlix.com. Good stuff.

  5. Zed says:

    I am done with Netflix. Not worth it for their original programming any more and I have prime video. Over the past couple.years, prime video is adding tons of titles while Netflix is losing more and more. They are about equal now and I don’t find house of cards or orange very compelling any more. Bye Netflix!

  6. So says:

    In a few months of summer with lousy network programming, they’ll be baaack!

    • Kymor23 says:

      No we won’t So, the technically advanced use movie apps, and firesticks, when the dog days of summer are a bit much to handles. Netflix is a dinosaur, that only babyboomers,may utilizes…of whom the youngest ones are 55yrs old

  7. Datku says:

    I was a long term customer. I was one of those about to see the rate hike as they got rid of the grandfather plans. The amount didn’t bother me, more that I wasn’t utilizing the service that much any more that lead me to being on the fence. But seems trickling costs over time add up and small increase here, small bump there, always seem to increase. So, I closed my account. Sure my close account will add to the numbers of the grandfather accounts that are seeing rate increases, but really my main reason is lack of use.

  8. Appearing Tonight says:

    I’ll deal with the price increase but if they make me change my password one more time I am out . . . .

  9. dave says:

    They raised my rates I didn’t argue. Still a great value at $9.99. It’s still cheaper than renting movies from the video store was. and you don’t even have to leave your house. I don’t see why folks would make a fuss about it. Look at all the other services that charge way more LOTS more and offer nothing. I think sometimes folks just want something to bitch about.

  10. Anamaria says:

    They have nerve to raise their prices, they have the worst offerings of shows and movies, they don’t even have full seasons of shows. Netflix sucks!

  11. Anatolew says:

    Complaining about a $2 rate hike as a “20% hike” reminds me of a five-year-old kid I knew (well, actually me) who was outraged when they hiked the price of licorice whips from 1 cent to 2 cents, a 100% price hike! (Yeah, I’m old.) The subscriber loss is no big deal–I remember in a business class seeing the bell curve of customers vs price –there’s always a trade-off. I dumped cable a ew years ago and don’t miss it with Netflix, Hulu, and Amazon Prime subscriptions. While I too find the limited number of films streamed to be frustrating at times, I also subscribe to the disk rentals, which has a great deal more variety to offer (my queue is full with 500 films in it). Sadly, in this instant gratification society, that end of the business–which gives Netflix most of its profits–is slowly fading away. Soon we’ll all be slaves to constantly shifting contract deals between streaming services and content providers.

    • Juan Gandini says:

      nobody is concerned about the 20%, they are just reminded that they don;t use the service and were too lazy to cancel at $8 a month, and now they say “now’s the time to cancel”. You need to use it twice a week for it to be a bargain. I haven’t used it in over a month, I seem to default to amazon all the time now

      • Johnny says:

        Exactly!!! It just reminded me that it is of no worth to me at all but I was too lazy to cancel. They gave me the motivation I need. But I disagree with the statement that “nobody is concerned about the 20%.” Actually I was. It is the principle.

  12. jedi77 says:

    It’s the quality, not the price that matters.

    So if they keep spending my subscription fee on Sandler and Gervais movies, they can expect a cancellation.

    I simply don’t understand why they would make these deals with complete has-beens like Sandler (and did I hear about Eddie Murphy doing a deal too?).

    And also the new CW deal? Nope. Again, quality matters Netflix. And marketing shows to teens and tweens is not quality.

  13. acurat says:

    For those of us who dumped cable, this is is a small price to pay. I now pay $24 more a year for Netflix than when I started. Of course, when I started I paid $160 a month for the triple play of phone, internet, and TV. Then I went to Netflix, Hulu, and a digital roof antenna with Vonage for phone and Cablevision for internet. Total cost: $99. If I add in ESPN channels and get Sling, the price adds $20 more a month for a total of $119 monthly. For me, still a good deal compared to the triple play cable wants to give me after discounts expire.

  14. Joe Case says:

    Didn’t they learn the last time they tried to raise prices? Sorry, netflix sucks. I’ve subscribed twice in about 10 years and both times i canceled within 3 months because I watched everything I wanted to see. Most of their selection is outdated.

    • Dana says:

      This is still the first time they have raised prices. Netflix is finally starting to increase the prices for those of us long term subscribers… Just finishing what they started. $8 to $10 per month is still a bargain if you think about it.

      • Juan Gandini says:

        They raised prices once before in 2010, the year before they split the DVD and Streaming. before that, they were always lowering prices, I think they started with a monthly $19.99 for unlimited DVDs and lowered it all the time

  15. Ron B says:

    Ten dollars a month is still a bargain to me.

  16. Jeremy says:

    I Love Netflix. I don’t have cable and they are much cheaper than just an antenna package with your cable company. It’s still going to be a bargain at the 2 dollar rate hike.

  17. Steve says:

    I think they can raise it as much as they want and I can quit any time I want. I am retired and I will not see a 20% raise in my income but they want me to pay 20% more for the same stuff. It would be worth it if I were hooked on a Netflix only show but I am not. They have added and continue to add things that I like to watch and I do like watching an entire list of shows at one time which you can not do on regular Dish. When it gets to the point where I do not watch for a month I will cancel for a while and then see what has been added to see if I want to rejoin.

    • I hear ya buddy,I cancelled mine awhile ago because I became bored with the content.Way to many B-grade flicks being added.They really need to add more up to date movies in my opinion.I do miss it from time to time,but as you said I can renew if I choose to.I don’t know if its worth $9-$10 though lol….

  18. Mike says:

    As for me I don’t mind the 2.00 price hike. Netflix has increased the number of foreign programs substantially over the past few years and that’s a plus for me.

  19. BruceK says:

    My only problem with NetFlix is that the only thing I find worth watching are documentaries, and Amazon Prime has many of them. Then there are some good series, but once or twice a year, meanwhile I have to pay every month, mostly for nothing. I don’t care what the price is – but I do want value, something to watch.

  20. kathy miller says:

    This site tries to send me to Variety to sign up with them. Really, people are going to cancel over two dollars?

  21. Yeah,yeah, yeah. Thats what EVERBODY said in 2011. Price hike will kill Net flix… OR, a 54.00 stock in 2012 went to almost 1000.00 a share in less than 3 years. I still pray my ” Financial Adviser” has a flocking heart attack every day …

  22. Disney Anonymous says:

    As long as they continue to make Netflix original shows, I’m all for a price increase. It’s awesome.

  23. Mike Daniel says:

    $10 a month is nothing. Absolutely NOTHING. I pay $12 a day just for lunch.

  24. I don’t consider myself being “raped” by Netflix at $9.99 per month, after paying $7.99 for the (approximately) 8 years. I have looked at Hulu (didn’t meet my needs) and Amazon (good service, but I’m happy where I am, price difference and all) and will stay where I am. With my 5 free, local, OTR channels, Netflix and Sling TV, I will be paying $32.00 a month total as opposed to $85 for basic cable (more channels with cable, true, but not the content I want or will use).

  25. andy west says:

    when people quit Nexflix then and only then will the company lower its prices. They are raping the customers.

    • Ed says:

      If $2/mo is somehow “raping” you, perhaps your broke ass shouldn’t be subscribing to Netflix in the first place. And dump that smartphone with its 10GB/mo data plan that’s far more costly than $2/mo.

    • WTF Guy says:

      Raping the customer? You must be the guy who likes Taco Bell’s Dollar Menu.

    • Ramsey says:

      This is both hyperbolic and idiotic. It would be bargain at twice the price and subscribers know it. They are likely to shed people who aren’t using the service, but I would be surprised if half their stated cancellations occur.

      • nunya says:

        no it wouldnt especially since theyve started flooding it with spanish speaking crap as for the other guys taco bell remark some of us live on a god damn budget which is why we cut our cable and came to netflix to start . ive been a customer since netflix started as soon as they increase my monthly ill be giving my business to Amazon.

  26. This is a bogus survey. No one is going to cancel their Netflix subscription. It is severely undervalued. Even if they double the price people will not cancel. Plus the original content they are producing is mind boggling.

    • srgmac says:

      UNDERvalued?
      Lol..Have you see the catalog of shows and movies that they have?
      Many of them are titles no one in their right mind would ever want to watch; or they are titles that looked good, or should have been good, but ended up being stinkers due to bad directing, writing, acting, etc.
      If you want to see what I’m talking about — look at the content HBOGo has to offer, and compare their catalog to Netflix — I’m not even talking about their exclusive series like The Sopranos or Game of Thrones — just look at the movie library that HBO Go has, and compare that to Netflix’s movie library.
      It’s leagues apart…

    • Zed says:

      I quit Netflix just now as prime video has more movies and better original content at this point and voila- it’s already part of my prime subscription.

    • Keith says:

      I do not subscribe to NetFlix for their original content . I expected more major movie releases but have seen few that are not already out on DVD for many months and few of them . I would rather they spend more on mainstream movie content than original content . Personally if not for my wife’s viewing wants I would be paying for any streaming services . Over the air channels in my area are plentiful with a wide variety of programming . The cost of internet service is a deterrent to adding more costs to my entertainment . When your ISP jacks up your internet service if you drop their cable programming should be illegal . Especially when there is not competition to control service costs . NetFlix is not under valued but overvalued by the subscribers and that is what is driving up the subscription prices .

      • nerdrage says:

        Mainstream movie content – especially if recent – is extremely expensive because it’s very lucrative for movie studios and movie theaters. They aren’t going to let Netflix have Captain America or Star Wars very soon after theatrical release. Check global box office stats sometime and think about how much that is worth.

  27. Cath says:

    If you go to just one movie and buy a small popcorn and a small drink you are paying twice the amount of the subscription. No one likes incremental price changes. Our cable recently went up $5. All this hand ringing seems excessive.

  28. Steve C. says:

    what do they plan to do with the revenue generated? Do they plan to get better or just more crappy movies? Or are they planning on putting in pools at their palatial estates? If I’m paying more I should get something for it…right? Well, why not tell people what they are getting for there money?

    • WTF Guy says:

      That is just idiotic. If you don’t like the service don’t subscribe. They owe you no explanation about why they are raising their price, or what they plan to do wit the money.

      • nerdrage says:

        Actually, they do owe subscribers an explanation if they want subscribers. There is plenty of stuff on the way, some of it sounds pretty good. I tried to post a link to the 58 shows under development but I guess variety doesn’t allow that. Anyway, google “Netflix development” and you’re likely to find something. Netflix itself could do a better job of publicizing what’s in development rather than waiting till a couple months before release to start publicizing it on their site. They have a captive audience for their website/interface, why not have a Coming Soon section? Damn Netflix hire me to do your marketing so you don’t screw up so badly anymore!

  29. Brian says:

    It’s like people don’t understand that by pulling in almost have a billion dollars in additional revenue they’ll be able to focus on making more content deals like the ones they were able to close with Disney and also focus on their original content. $10 vs $100/month for cable… and we’re complaining? Crazy.

  30. MemyselfI says:

    How about I’ll just keep using free streaming sites with my Tor browser. Yes, I will straight up steal from these billionaires.

    • mcfilms222 says:

      That’s great. I work in production and I can assure you that I am NOT a billionaire. When you refuse to chip in on music, video or games, you don’t just hurt billionaires. It impacts all the craftspeople involved too. Just because you CAN rip off something, doesn’t mean you SHOULD.

      • nerdrage says:

        Just goes to show, all that sh*t about how people pirate because poor babies can’t afford to pay is BS. If $1 or $2 is going to break your budget, you’ve got more problems than watching movies and TV shows. Get your ass off the couch and get a job. THEN you can afford a couple more bucks a month. But in reality, some people just want something for nothing and will come up with any excuse to avoid the truth about themselves.

  31. Linda Chase says:

    I cancelled.

  32. James says:

    Frankly, House of Cards is the only thing worth watching on Netflix. I’m gonna cancel just on personal principle. A 25% fee increase is absurd, even if the absolute money is nearly nothing to me. Regardless, they won’t miss me.

  33. Baboy Taboy says:

    500k over 41million, i don’t think the 500k is cutting over cost!, it is a very small margin for a big profit. question is if the 500k people will be cutting because of cost then where will they move to?

    • MemyselfI says:

      Where will they go? They’ll get VPN’s and Tor browsers and go to free sites (while our internet masters still allow them), that’s where.

      • nerdrage says:

        Brian’s right, Netflix’s market is the vast number of people all over the world who don’t know or care about learning how to pirate without getting malware and other nasty things…Netflix will be fine.

      • Brian says:

        You’re an edge case. Most people barely know what Tor or an Android Box is… let alone think of it as a valid alternative. You are certainly welcome to do whatever you want, but to suggest there will be a massive migration anytime soon to Tor is an overstatement.

  34. Chief Wiggum says:

    The people who bitch and complain about the price increase are probably the same people who pay $5.00 a day for overpriced Starbucks coffee. Two WHOLE dollars? Oh no, my kids can’t eat this week.

    • EXACTLY what i was thinking Chief… But then the people who pay 5-6 dollars for coffee, and there are 100’s of millions of them, aren’t all that bright to begin with ….

  35. girolamo says:

    I want my $2.00

  36. bob says:

    makes sense to me. something people spend 3 hours a day doing they would surely give up in a second because of a $1 per month price hike. quick! sell NFLX.

  37. Kimmy says:

    My husband and I love love loveeeeeeeeee NETFLIX!!!

  38. The Le says:

    Let them leave. They’ll be back when they realize Netflix is still the best game in town for what you pay. They always come back.

    • Jim says:

      Ridiculous. The library is shrinking very rapidly and prime is going very rapidly. Almost the same now and prime video is already paid/bundled with a great prime subscription for less than netflix. No brainer for me.

  39. I have cable and its $13,000 a month. $9.99 would be heaven.

  40. Andy says:

    Kind of odd to see people dropping the service over such a tiny fee increase. I mean seriously…two dollars shouldn’t be breaking anyone that has a Netflix sub. It seems to me that Netflix has also purposely added better and/or bigger titles to their streaming selection as the last grandfathered accounts are set to renew at the higher price. Stuff that I had searched for previously is now magically available to stream. I can’t complain about that. Until another service comes up with a way to get similar content AND offer original movies/shows on par with what Netflix has done, Netflix will remain king of streaming.

    • Keith says:

      NertFlix is getting like cable . Lots of “original programming ” I do not want over more mainstream movies that I do want . That is what NetFlix was originally . A movie rental business then a movie streaming business now it is trying to act like a traditional cable provider . Provide more mainstream movies in a more timely manner and I might keep it . The same reason I only subscribe to HBO for each new season of Game Of Thrones then drop it when it is over . They have nothing else I want to pay a monthly fee for .

  41. slappy squirrel says:

    The number of decent movies available for streaming has gone down drastically in lieu of serial tv. It reminds me of the original, free Hulu. And you want me to pay *MORE* for this lack of variety? Buy bye Netflix, hello Amazon.

  42. Bozo says:

    This is old stuff. NetFlix has been telling people about this for sometime. Nothing new here.
    And I will pay the two bucks more a month. No Big E.
    And I also have two out in the mail with them, and going to keep that also…
    I also have Amazon & CBS All Access. I canned the Cable TV…..And just use over the air.

    • Bobbi says:

      A 2 buck increase, is chump change for what we get. We also subscribe to Amazon, have HBO and have east coast AND west coast feed thru Directv…if we can’t be entertained by one streaming service, there’s always another one to turn too, and we watch them all. We live in California… I knew who the final winner was on American Idol at the 5:00pm broadcast time, then watched parts AGAIN at its broadcast time at 8:00pm…OK, okaaaaaay, I’ll get a life, but I’ll STILL pay for my services. To annoy you more – I always buy popcorn at the show as well, two or three times a month…. Oh gawd, I DO need to get a life!

  43. Jack J. says:

    unfortunately they’ve got me hooked on the Marvel series so I don’t plan on cancelling simply because of that…..otherwise I would……….pay attention Amazon and do some similiar series.

  44. Bill says:

    I canceled my Netflix streaming plan about a month ago. The selection is just very poor overall unless you’re into Netflix series (which I am not). I still have my Blu-ray by mail plan, though.

    • Jpe says:

      Same here. What most people forget is that the disc by mail service is really the best thing about Netflix
      Aside from a couple originals the streaming selection is pretty bad… and often in the wrong aspect ratio. In fact, even some original movies (PEE-WEE, SANDLER) are actually only offered in 720p HD!

      • Jerry Boxwell says:

        Do you know anything about television? Almost everything from cable is in 720p or 1080i. Almost nothing is in 1080p except for streaming services or in demand content. 720p is better than 1080i so be happy you are getting that beautiful progressive scan unlike what you would get on cable. Also 720p isn’t an aspect ratio it’s a resolution. 720p and 1080p have exactly the same aspect ratio they are different resolutions. They are both 16:9 and look great on a typical HD TV.

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