The U.S. increases
The increases of 13 to 18 percent are the largest increase since Netflix began its video streaming service 12 years ago.
The most popular plan will see the monthly charge go to $13 per month from the present $10. The plan offers high definition streaming on two different internet connected devices simultaneously. Even at the new price the Netflix plan remains a few dollars cheaper than that of the popular HBO which charges $15 per month.
In the past, Netflix offered a basic $8 a month streaming plan while it hiked rates on more comprehensive plans. This time it has raised the price of the basic plan as well to $9 per month. A premium plan offering ultra-high definition will be raised from $14 per month to $16.
This is the fourth time that Netflix has increased its U.S. price with the last hike coming in late 2017. This is the first time that all 58 million U.S. subscribers, the number reported by the company last September, will face an increase.
The higher prices will be charged to all new subscribers and will hit existing customers within the next three months. Customers in 40 Latin American countries billed in U.S. currency will also be affected with the exception of key markets Mexico and Brazil. Netflix had almost 79 million subscribers outside of the US in September. More than in the U.S. itself.
Netflix investing large amounts in films and original shows
Netflix has made a huge investment in original shows and films. As a result it has assumed a large debt. Presumably Netflix is trying to compete with rivals such as Amazon, Disney and AT&T.
The company had a number of hits with its original material during the last five years. These have included: “House of Cards”, Orange is the New Black, “Stranger Things”, “The Crown” and the recent film the “Bird Box” On the basis of these, the company believes it can gradually raise its prices. The company said in a statement: “We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience.”
Netflix spent about $4 billion last year and expects to spend about the same this year. Netflix has been borrowing large sums to pay for the expenses of programming. It raised $2 billion in an October bond offering even though it already had $12 billion in debt.
Stock price movements
Netflix is facing ever increasing competition by large firms. Coupled with the company’s huge debt, this has led some investors to question whether the company can sustain its leading position in the streaming video area. The price of the stock has dropped significantly from a high of $423.21 last June. However, the recent price rise was received favorably by investors who no doubt believe that the increases wont significantly slow down subscriber growth. It is still charging competitive prices.
The company shares rose 6.5 percent on Tuesday in the early afternoon to $354.79.
