Investors Love the New Netflix Price Increase But Will Subscribers?

Crisis in the stock market

Streaming media platform Netflix has recently announced they are, once again, raising prices for US customers.  The price increase will reflect all membership rates, increasing prices between 13 and 18 percent, marking the company’s biggest such increases since the service’s original launch 12 years ago.

Oddly, the service’s most popular plan will see the largest price hike, which will jump from $11 to $13.  This option—again, the most popular—offers high-definition streaming on as many as two internet-connected devices at the same time. The highest priced plan, which offers ultra-high definition will increase from $14 to $16.  Finally, the lowest price tier will increase from $8 to $9. 

This is now the fourth time Netflix has raised prices. The last time they did so it was in October of 2017, and on that day, share prices jumped 3 percent. Similarly, the announcement of this rate hike—again, the largest since the company’s launch—pushed share prices up 6 percent.  

While investors are happy, we have yet to see how subscribers will feel about the price increase.  You may recall a massive user backlash when Netflix revealed their plan to unbundle video streaming from its previous mail-order DVD model. Upset users retreated from the subscription based service at a rate of 60 percent. To put it another way, Netflix lost about 600,000 subscribers because they wanted to keep both services.  

 Fortunately for Netflix, previous rate hikes have not had the same effect on subscriber growth. As a matter of fact, Netflix’s domestic subscriber growth rang in just shy of 11 percent year over year; the service now has 58 million subscribers in the United States. 

In a statement, the company comments, “We change pricing from time to time as we continue investing in great entertainment in improving overall Netflix experience.”  

Now, Netflix has a bigger list than ever of streaming media options.  Not only do users have similar options like Hulu and Amazon Prime streaming options (at competitive prices) but Disney and Apple have both announced streaming plans. Of course, Netflix also has a major cash flow problem, too, so there is something to be said about users having to pay more just to offset the company’s growing debt.