I've been a Netflix member for a long time now, and in that time, I've seen a lot of movies. The joy of being able to walk out to the mailbox and pull out a new DVD is a joy that a lot of people feel, and have enjoyed for some time now. But for those who haven't already signed up, it may be a good idea to do so soon as new price hikes may be arriving for new members.
The projected price hikes—said to be between $1 and $2—are said to be more strongly considered after noticing that pricing changes in Ireland really didn't have much impact on the company's overall sales, so it reasonably figures that small hikes can be safely transferred to the United States market. Under current pricing plans, users can stream unlimited content for $7.99 a month, and a variety of other plans exist depending on how often users want to receive DVDs in the mail.
But with rapid numbers of new subscribers showing up, and Netflix planning to carry on in terms of bringing in new original content—according to word from a recent conference call with CEO Reed Hastings—price hikes were likely inevitable. As Hastings reportedly put it “If we want to continue to expand, to do more great original content...we have to eventually increase prices a little bit.”
Reports suggest that the price hikes are likely to hit with the second season premiere of popular Netflix original series “Orange is the New Black.” It's also said to be the first price change for Netflix since 2011, when the company tried to break off into separate streaming and DVD plans, a course that ultimately proved disastrous and was abandoned fairly quickly.
The question remains, how will the market react to this? While the company's stock price went up following the announcement, at last report, it also turned in a first quarter profit of $53 million, around 86 cents a share. That's up in grand style over the same time last year, which saw a profit of just $3 million, or around five cents a share. But since the price hikes in question seem to come on a time delay and only impact those who haven't already signed up, it's enough to wonder if maybe Hastings et al are trying to front-load the new subscribers as fodder for content negotiations. There's a clear advantage—savings somewhere around $12 - $24 a year—to sign up now and basically beat the price hikes, which admittedly could come to current subscribers later, but for right now don't seem to be heading that way.
Still, with cable plans costing substantially more than even Netflix's planned price hike—which comes not so long after Amazon Prime launched a price hike of its own back in March—it's easy to see why the company is looking to get some more cash in its coffers, especially if plans go through to get more original content in. Just ask any filmmaker; movies and television shows don't get made for free, so Netflix looking for extra revenue in that light does make some sense.
Will it be enough to shy people away from Netflix? It's still a very good value, especially given everything that's already available on the service as it is. But only time will tell if the price hikes even go through in the first place, let alone what impact said hikes will have on the user base.
Edited by
Maurice Nagle
