Netflix May Change Its Prices

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The company says existing customers won't bear much of the burden when new pricing rolls out. We'll see.

Are you still a fan of Netflix? If so, then you should know that the online video service is considering changing prices, establishing “good, better, best” tiers and mulling new streaming combinations (beyond its current $7.99-per-month fee) for new members, reports Bloomberg Businessweek.

If you’re feeling a bit anxious about those proposed changes, you’re likely not alone. Just three years ago, the company’s announcement of a price increase and separation of its video and DVD services lost it about 800,000 subscribers in a quarter and tanked its stock, according to ABC News and other sources.

But don’t hit the cancel button for Netflix just yet.

Netflix said in a recent letter to shareholders:

If we do make pricing changes for new members, existing members would get generous grandfathering of their existing plans and prices, so there would be no material near-term revenue increase from moving to this potential broader set of options. We are in no rush to implement such new member plans and are still researching the best way to proceed.

You might wonder why the company is considering these changes now.

Well, it’s popular. You might still remember the sting of the 2011 missteps, but plenty of others apparently don’t. More than 2.3 million U.S. households signed up for the streaming service in the fourth quarter of 2013 and stocks rose 16 percent, reports CNNMoney.

Also, tier pricing is just smart business, reports Bloomberg Businessweek.

Over time, a pricing strategy without different tiers can curb a company’s financial upside, which is why most merchants have landed on a model geared toward selling products and services at budget, middle, and upscale levels. Restaurants typically find that their least- and most-expensive wines are vastly outsold by the middle-tier offerings — no one wants to appear a cheapskate or foolish spendthrift.

So prepare for some future Netflix announcements but remember –– at least this time you’ve been warned.

Stacy Johnson

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