Netflix To Raise Prices For New Customers

Netflix has revealed plans to raise the price of its popular streaming service.

The company made the announcement in its first-quarter earnings letter to shareholders, which stated that the company will raise prices for new customers by either $1 or $2 at some point before June 30, 2014.

In a joint statement, Netflix CEO Reed Hastings and CFO David Wells wrote:

“In the U.S. we have greatly improved our content selection since we introduced our streaming plan in 2010 at $7.99 per month. Our current view is to do a one or two dollar increase, depending on the country, later this quarter for new members only. Existing members would stay at current pricing (e.g. $7.99 in the U.S.) for a generous time period. These changes will enable us to acquire more content and deliver an even better streaming experience.”

The news comes just a month after the company’s main competitor in the streaming market, Amazon Prime, announced it will be raising its prices from $79 per year to $99 per year.

Netflix has spent the past year teasing a price increase, but it’s clear they didn’t want to push any price changes on customers too quickly – Especially in the wake of strong international growth over the past quarter, which saw quarterly revenues exceed $1 billion for the first time in the company’s history. Encouraged by the Amazon Prime price increase, which didn’t cause a significant drop in subscribers, and the success of their own price increase test for new customers in the Republic of Ireland, now appears to be an ideal time to roll out price increases to customers around the rest of the world.

Existing Irish customers have been allowed to keep their old plans (and prices) for two years, and the company is expected to allow existing customers in other markets to keep their current price structure for at least one year before rolling out the price increase to everyone.

At this time, it is not known whether any costs associated with direct peering agreements with ISPs have contributed to this price increase.

Netflix currently has 35.7 million subscribers in the U.S., and a total of 48.4 million subscribers worldwide. These customers generated $1.07 billion for the company in the first quarter of 2014, for a net profit of $53 million. This is a significant increase from just a year ago, when the company made just $3 million in net profit.

Stephen Doble

From his London office, Stephen leads our new media industry coverage at Videoter.

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