Coverage: Netflix is raising prices on streaming plans

Netflix is increasing its subscription prices for the first time in two years, a move that will affect most of its 52 million customers in the United States, the company said Thursday.

Monica Castillo of The New York Times had the news:

The company’s most popular plan — which allows customers to stream titles on two devices with a single account — will increase by $1 to $10.99 a month. The premium plan — which allows customers to use the same account for four screens at once — will increase by $2 to $13.99 a month. The basic streaming plan, which only allows for streaming on only one screen at a time, will remain at $7.99 a month.

Existing customers will be notified of the new prices beginning Oct. 19, and they will have 30 days to decide whether to keep their current plan, change their subscription or cancel their account, Netflix said in a statement.

The price hike arrives as Netflix continues to increase production of original TV and movie content. The company said that by the end of the year it will have spent around $6 billion for original content in 2017. In August, Ted Sarandos, Netflix’s chief content officer, told Variety that the company planned to spend about $7 billion for original programming next year.

Rex Crum of the San Jose Mercury News reported that it’s the first price increase since October 2015:

It will be the first time Netflix has implemented a price increase since October 2015.

There’s no real secret behind the reasons for Netflix raising its prices. The company is banking much of its future on original programming, and has said it will spend $6 billion in this year alone to acquire and produce original and exclusive programs.

Michael Pachter, who covers Netflix for Wedbush Securities, noted that the price increase is only in the U.S. and estimates that the company will take in about $700 million in new revenue from the new pricing structure. Pachter based his estimates on the approximately 50 million Netflix subscribers in the U.S., along with revenue from new subscribers who sign up next year.

“I don’t think most existing subscribers will even notice (the increase),” Pachter said. “Netflix has been really good about notifying subscribers of price hikes, so everyone will receive an email, but it’s unlikely that many will care, even if they read it. I think that most subscribers consider the service a great value.”

Dade Hayes of Deadline Hollywood reported that the stock hit a record high on the news:

Investors and analysts said the company has more leverage and was wise to bump up prices as a way of partly offsetting its massive outlay on programming. Content chief Ted Sarandos this week said Netflix would spend about $7 billion on content in 2018 and sees no end to the stepped-up spending trend.

According to the streaming service’s signup page, the most basic plan remains $7.99 a month. But the mid-priced Netflix option enabling streaming on two devices at once has gone up by $1 to $10.99 a month, and the highest-end subscription, with high-definition streaming on up to four devices, is now $13.99, up from $11.99.

Netflix has faced a degree of backlash when it has hiked prices in the past, but as it keeps spending heavily to build a content arsenal — $7 billion was the company’s most recent projection for 2018 — consumers seem likely to take the increases in stride.