Netflix raises prices for U.S. customers

by Kim Boateng Last updated on January 17th, 2019,

Streaming service Netflix has announced it is raising its prices in the US.

The company is increasing the cost of its standard plan in the US from $10.99 to $12.99 a month.

The rise – between 13% and 18% depending on the plan – marks the firm’s second increase in less than two years and is the most significant since it launched streaming video in 2007.

UK prices have not changed, but subscribers in some countries outside the US can also expect increases.

Those countries include countries in Latin America and the Caribbean such as Uruguay, Barbados and Belize, where the firm also sets prices in dollars.

However, Netflix said the move was not an indication of global plans.

Netflix said: “We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience for the benefit of our members.”

The increase comes as the firm is spending heavily on original material.

It is also facing mounting competition, as companies such as Disney and NBCUniversal announce their own plans to launch streaming services.

Netflix says it will notify existing subscribers of the increase before it goes into effect. The higher prices apply to new subscribers immediately.

New Netflix users are already being charged the higher prices but existing customers will see them phased in over the next few months. But subscription services like Netflix don’t seem to have trouble keeping customers, even after price hikes, which means they could keep coming.

The streaming giant has made big bets on lots of original programming to set itself apart from its competitors. The company’s stock price soared almost $22 – to nearly $355 per share – reflecting Wall Street’s belief the higher rates won’t upset consumers.

From TV shows like “Stranger Things” and “Orange is the New Black” to movies like “Bird Box,” Netflix has been churning out hit after hit after hit. While all that original content draws in new subscribers, they also cost a lot of money to produce.

Its most expensive monthly plan now costs $16, compared to $12 for Hulu, $9 for Amazon Prime Video and $10 for CBS All Access.

“This is the fourth price hike over the last five years and people keep paying,” said financial analyst Rick Munarriz.

Netflix is the world’s largest premium video service, with nearly 150 million subscribers. Its membership almost tripled since 2014 even though the price of its standard plan has gone up nearly 63 percent.

“It’s a monthly plan, it is something that you sort of just set it and forget it like many other monthly subscription services. It’s almost an afterthought when you’re scouring your credit card bill and that $12.99 a month comes around. You’re usually fine with it,” Munarriz said.

Munarriz believes most customers will continue paying for Netflix so long as the company keeps delivering hits.

“There will come a point where people will say – ‘no mas!’ but until they get to that point, you’re going to see Netflix nickel and dime about every year or so and adjust their prices higher,” Munarriz said.

In a statement, a Netflix spokesman said, “we change pricing from time to time as we continue investing in great entertainment.”

Netflix subscribers will get 30 days’ notice via email before they start getting higher monthly bills.

Shares in the company jumped more than 5% on the news. The firm is due to report earnings to investors this week.

The three major U.S. stock indexes rose for the first time in its past two sessions Tuesday after a tech rally led by strong gains from Netflix.

The Dow Jones Industrial Average was up 155.75 points, or 0.65 percent, at the end of trading Tuesday, while the S&P 500 and the Nasdaq Composite rose 1.07 percent and 1.17 percent respectively. All three posted their first gains since Thursday

Tuesday also marked the first time since December that the S&P 500 closed above 2,600 points, a threshold monitored by traders.

Shares of Netflix led the rise on Tuesday, as the entertainment streaming service announced it is raising subscription prices for all of its plans.

Netflix stock climbed 6.52 percent while other tech stocks including Facebook, Amazon, Apple and Alphabet all rose more than 2 percent.

J.P. Morgan Chase also rose nearly 1 percent Tuesday, erasing earlier losses after the bank reported lower-than-expected fourth-quarter profits.

Investors also received positive news internationally, as the People’s Bank of China announced it would increase efforts to spark the nation’s economy by improving credit availability for smaller companies.

The Chinese Ministry of Finance also promised to lower taxes and increase infrastructure after the country reported lower-than-expected trade data on Monday.

Some of the positives in the market were offset by news that British lawmakers struck down Prime Minister Theresa May’s Brexit plan, leaving investors concerned about the prospect of global economic growth.

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Kim Boateng

Kim Boateng

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