Users holding off on a Netflix subscription might want to start grabbing their “House of Cards” fix now if they want the most bang for their buck.
As a part of his letter to shareholders, Netflix CEO Reed Hastings said that the company plans to hike its monthly subscription price for new customers later this quarter in order to bring in additional revenue.
“Our current view is to do a one or two dollar increase, depending on the country, later this quarter for new members only,” Hastings wrote. “Existing members would stay at current pricing (e.g. $7.99 in the U.S.) for a generous time period.”
While the company has seen growing revenues this quarter, up almost 25 percent year over year, it’s clear that Hastings wants to bring more money in to drive greater content acquisition, as well as increasing network performance.
On today’s earnings webcast, Hastings said that the company expects the revenue from the price hike to bring a “modest” benefit to the Netflix’s balance sheet in the short term. While it’s unclear how long existing users will be able to hold on to their cheaper subscription, Hastings said that more details would be coming soon.
Netflix has been experimenting with new pricing models, including offering a cheaper tier of its service, but Hastings said on the webcast that the company has set aside plans to add an additional pricing tier for right now in order to focus on the price increase. That said, a price increase could drive greater demand for a cheaper pricing tier in the future.
It may have been easier for Netflix to consider its own price hike in light of Amazon increasing the price of Prime from $79 a year to $99 a year. Under Amazon’s old pricing scheme, a year of Netflix was almost $17 more expensive than a year of Prime. Now, a year of Netflix is slightly more than $3 cheaper than Amazon’s service.
If Netflix increases the price of its service to $9.99 a month, it will cost almost $21 more than Prime, but that’s peanuts compared to the nearly $41 price difference that would have existed if Amazon hadn’t raised the price of Prime.
The two companies’ fates are still intertwined: Netflix announced today that it is going to add voice search capability to its app for the Amazon Fire TV set-top box “later this year.”