Netflix Plans a Price Hike, Again
Netflix, which ran into trouble a few years ago when it raised prices for its video streaming service, is going to try again.
The company announced today that it plans to raise prices for new customers sometime this spring from $8 a month to $9 or $10 a month.
Eventually, the company’s existing members will be asked to pay more as well, CEO Reed Hastings said in a letter to shareholders.
“Our current view is to do a one or two dollar increase, depending on the country, later this quarter for new members only. Existing members would stay at current pricing (e.g. $7.99 in the U.S.) for a generous time period. These changes will enable us to acquire more content and deliver an even better streaming experience.”
Netflix has been signaling for some time that it would change its pricing structure. Last year it started introducing a $12 “family plan” that let subscribers watch up to four different streams at a time.
And late last year the company began experimenting with other pricing tiers. In January, the company raised pricing for new members in Ireland by a pound a month, while promising to keep existing subscribers’ pricing for two years.
The move comes nearly three years after Hastings bungled a price hike designed to move subscribers away from DVD rentals. Subscribers railed against the move and at Netflix’s clumsy attempts to explain it. That led to a decline in customer numbers and a dramatic drop in the company’s stock price.
Wall Street seems to be just fine with today’s news — along with news that Netflix’s Q1 numbers came in right around expectations. Shares are up seven percent in after-market trading.
Hastings also used his shareholder letter to officially come out against Comcast’s proposed merger with Time Warner Cable.
In February, Netflix agreed to pay Comcast in order to ensure its video reached Comcast’s broadband subscribers. But in March, Hastings announced that he really didn’t want to do that deal, because he thought it violated the spirit of “net neutrality” principles.
If Comcast gets even bigger, companies like Netflix will find themselves cutting more of those deals, Hastings said.
“Comcast is already dominant enough to be able to capture unprecedented fees from transit providers and services such as Netflix. The combined company would possess even more anti-competitive leverage to charge arbitrary interconnection tolls for access to their customers. For this reason, Netflix opposes this merger.”
Update: Comcast is not shrugging off Netflix’s volley. The cable giant, whose NBCUniversal unit is an investor in Re/code, has published a lengthy response to Hastings’ letter. Final quote: “Netflix should be transparent that its opinion is not about protecting the consumer or about net neutrality. Rather, it’s about improving Netflix’s business model by shifting costs that it has always borne to all users of the Internet and not just to Netflix customers.”