Netflix to increase its subscription price by $1 for new customers.
Netflix Inc. the online streaming giant has decided to increase the pricing of its Internet video service. The increase will be of $1 that will be applicable for all new subscribers within the United States, Latin America and Canada. The reason behind this increase is that the company wishes to compensate for the expenditures required to produce shows like “House of Cards” along with other original content.
So now the latest price of the service is $10 for the standard plan each month. This is not the first time that NFLX has increased its pricings since 17 months back, the California based serviced increased the pricing by $1. The increase in pricing clearly indicates that the company is now dealing with a lot of pressure since it now has several rivals like HBO, Amazon.com. these services have rights on various TV series and movies that is pushing Netflix to go an extra mile and offer services that are on par or even better.
The good news is that the current 42 million subscribers of Netflix in the United States will not be affected by the increase in price. The reason why the company is not increasing the price for old subscribers is that it wishes to avoid facing the customer backlash it has to deal with four years ago when they bumped the prices by almost 60 per cent for all those individuals who wanted DVD by mail on rent and Internet videos streaming.
The company at that point of time faced a menace where they had to deal with 800,000 subscribers who stopped using the service. Moreover, Netflix stock also got down by 80 per cent in just a matter of 13 months. This actually taught the company a lesson where they decided to stop increasing prices for old subscribers in the future and target new customers in case they wished to increase the prices.
Those subscribers who are using Netflix since May FY14 will be paying almost $8 for each month that will was powered with a deal that the prices cannot be hiked for 2 years.
According to Seattle Times, “Netflix’s audience continued to expand after last year’s price increase, a pattern that investors appear confident that will be occur again with the latest uptick in rates. Netflix’s stock surged $6.83, or 6.8 percent, to $114.93 Thursday.”
Many analysts at Wall Street Journal expected that the company would increase its price since their profits have been shrinking.
The decision is strategic and might assist them to redeem themselves.