Netflix raised the subscription price of its basic monthly service by $1, leading to a surge in its share prices on Thursday. Netflix’s stock went as high as 12% before eventually closing up 6.32% at $114.93. The news was first reported by Bloomberg.
No change for existing subscribers
Netflix’s monthly subscription plan costing $8.99, which allowed subscribers have two concurrent high-definition video streams, will now cost $9.99. The prices of other monthly plans including the $11.99 four-screen HD video plan and a $7.99 one-screen standard definition plan, remains the same. The new pricing of $9.99 is only for the new customers while the old customers can enjoy the services at the same old price of $8.99 for the next year.
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“To continue adding more TV shows and movies including many Netflix original titles, we are modestly raising the price for some new members in the U.S., Canada and Latin America,” the streaming firm said. As a token of thanks to the existing Netflix customers, who are not benefiting from “grandfathering,” the firm said they will continue to receive the service at their current price for a year.
Netflix also raised the subscription prices in Europe, where the subscribers will now be required to pay 1 Euro more. The company is very much in need of this funding to continue with its plans of making original content and acquire other films and TV content for the subscribers.
Netflix in need of funds?
Netflix expects to spend $5 billion on the original and acquired content next year, and the research firm Ampere Analysis expects the expenditure would grow to $6 billion by 2018. The video streaming giant has more than 69 million global subscribers, and the increase in price can up its revenue by more than $800 million annually.
Netflix’s standard plan is its most popular. This is the second time in the past 17 months that the company has raised its rates in the U.S. by $1. This trend of increasing the subscription price of the most popular plan reflects that the company is facing financial pressure as it competes with rivals like Amazon.com, HBO and other services for the acquisition of rights to the TV series and movies.
Netflix increased the price last year, which helped the company expand its audiences, and the investors and the company will be hoping for a repeat with the latest hike in the subscription rates.