The company plans to raise its prices for its popular streaming service by as much as $2 per month.
As expected, Netflix is getting more expensive, but only by a dollar or two, and only for new customers – at least for now.
The Internet video powerhouse on Monday announced its plan to increase subscription rates for new subscribers sometime in the next few months. The company says existing customers will continue to pay $7.99 per month for streaming “for at least the next year,” The Associated Press reports.
“If we want to continue to expand, to do more great original content … we have to eventually increase prices a little bit,” Netflix CEO Reed Hastings said in a conference call with analysts Monday.
Also on Monday, Netflix reported earnings ahead of expectations and a growth of 4 million subscribers. The new subscriber price hike could mean big bucks for the streaming service. According to Forbes:
With the company set to surpass 50 million streaming subscribers by the second half of 2014, the price increase could add between $600 million and $1.2 billion to the company’s revenues within the next two years. And if all goes according to plan, Netflix can potentially experience the opposite effect it did when it last tried to raise prices in 2011.
Netflix tried to separate subscriptions for DVD rentals and streaming services in 2011, and billed separately for them. It proved to be a disaster, with canceled subscriptions and a drop in stock.
The mailed-DVD side of the business is shrinking. AP says:
Through March, Netflix had 6.7 million DVD customers, a 52 percent drop from 13.9 million just two years ago. Netflix isn’t changing its DVD prices, despite rising postal costs.
Are you a current Netflix subscriber? Will you pony up an additional $1 to $2 per month when the grace period for existing Netflix customers is over? Share your comments below or on our Facebook page.