For the first time in three years, Netflix will raise its subscription prices.
At first, the change will only affect new subscribers, who will pay one dollar a month more starting sometime in July. Old subscribers will continue to pay the current rate of eight dollars per month into the next year. But after that, who knows?
CEO Reed Hastings may have some idea. He told the Associated Press that “when we look at the shows and movies that we will be able to get if we have a bigger budget, it’s exciting, We want to make the service better and better so more people will join.” In other words, if subscribers want the latest and greatest entertainment, they have to be willing to pay for it.
According to The Wrap, Netflix tested the price hike in Ireland with “little impact”. Customers’ reactions range from negative or ambivalent, but it remains to be seen if the company will lose business or if the price hike will deter new customers.
— Doug Delony (@DougDelonyKHOU) April 22, 2014
Shareholders are already happy due to an excellent first quarter. Netflix managed to add 2.25 million subscribers. After releasing their financial data CNN Money reported that stocks rose 6.6% after in-house trading on Monday. Netflix has 48 million subscribers worldwide, 36 million of those are located in the United States.
However, everything isn’t all sun and roses for CEO Hastings. Recently, the company came into conflict with Internet Service Providers over flagging streaming speeds. In the same CNN Money report Hastings accused the ISPs of “driving up profits for themselves and costs for everyone else.” Comcast quickly responded by accusing Hastings and Netflix of “inaccurate claims and arguments.” Both sides recently agreed to a connection deal.
The last time Netflix tried to raise subscription prices was 2011. Due to a poor execution and a poor economy the company lost 800,000 subscribers. The company hopes the price hike will go better this time around. S&P Capital IQ analyst Tuna Amobi told the Associated Press “The timing may not be as precarious as it was last time. They designed it to do the least amount of damage and protect themselves with potential upside.”
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