Wed | Mar 20, 2019

Netflix raising prices for 58 million US subscribers as costs rise

Published:Wednesday | January 16, 2019 | 12:00 AM
The Netflix logo is displayed on an iPhone.

SAN FRANCISCO (AP):

Netflix is raising its United States prices by 13 per cent to 18 per cent, its biggest increase since the company launched its video streaming service 12 years ago.

Its most popular plan will see the largest hike to $13 per month from $11. That option offers high-definition streaming on up to two different Internet-connected devices simultaneously. Even at the higher price, that plan is still a few dollars cheaper than HBO, whose streaming service charges $15 per month.

The extra cash will help to pay for Netflix's huge investment in original shows and films and finance the heavy debt it has assumed to ward off rivals such as Amazon, Disney and AT&T.

While subscribers may bemoan a bigger monthly bill, Wall Street cheered, sending shares up more than six per cent in midday trading.

 

NEW PRICES

 

This marks the fourth time that Netflix has raised its US prices; the last hike came in late 2017. But this is the first time that higher prices will hit all 58 million US subscribers, the number Netflix reported at the end of September.

Previously, Netflix had continued to offer a basic, $8-a-month streaming plan while raising rates on more comprehensive plans with better video quality and options to watch simultaneously on different devices.

This time, the price for the cheapest plan is going up to $9 per month. A premium plan offering ultra-high definition will jump to $16 per month from $14.

The new prices will immediately affect all new subscribers and then roll out to existing customers during the next three months. Customers in about 40 Latin America countries where Netflix bills in US currency will also be affected, excepting key international markets such as Mexico and Brazil.

Netflix had nearly 79 million subscribers outside the US as of September.

Higher prices could alienate subscribers and possibly even trigger a wave of cancelations. For instance, Netflix faced a huge backlash in 2011 when it unbundled video streaming from its older DVD-by-mail service, resulting in a 60 per cent price increase for subscribers who wanted to keep both plans. Netflix lost 600,000 subscribers - about two per cent of its total customers at the time - after that switch.

The company is now betting it can gradually raise its prices, bolstered by a string of acclaimed hits during that past five years that have included House of Cards, Orange is the New Black, Stranger Things, The Crown and, most recently, the film Bird Box.