Netflix Raising Prices for Monthly Subscription

NetflixNetflix is raising its prices for the monthly subscription, causing a backlash from subscribers old and new. The good news for those already on the service and those who sign up before the planned hike is it will remain at the $7.99 level for at least one year. There is currently no set date for the price hike, but it is likely to be before July.

This is the first time the streaming service has raised its prices in the last three years. More often than not, companies increase prices on a yearly basis to combat with inflation. Just last month, UK mobile service EE announced that customers would see a hike in prices to contracts agreed upon before January 23, 2014.

Reed Hastings, the CEO of Netflix, confirmed that the prices will remain the same for the current 36 million subscribers the service has. However, the prices for new customers will raise by between $1 and $2. There is no confirmation as of yet.

What is the reason for this price hike? According to Hastings it is due to the bigger and better shows like House of Cards being added to the service. Customers have long complained that there is not enough choice, and the service is not even worth the current $7.99 per month price. It has led to them questioning whether it will ever be worth the price hike, or whether it will blow up for the company.

However, Netflix believes that raising prices for its monthly subscription is the way to go. It is the only option if it wants to remain in business. There are currently increasing costs everywhere, especially within the movie industry. That is causing a problem for the profits, and if the company cannot make a profit it is not going to remain in business for anyone.

The company is currently trying to fight against a number of major TV channels, including Showtime and HBO, which constantly offer great viewing. There is also competition from Hulu, Amazon and many other online services offering similar services. The difference is many of these services offer more and better choice for customers. The only way Netflix can compete is by spending more money, and it needs to recoup that from somewhere.

Along with UK’s EE service, other companies have raised prices lately. One of those was Amazon, which raised its prices for its Prime service. Customers now pay $99 per year, seeing a $20 hike. If Netflix sticks to its lower end scale of $1 per month, customers will see $12 per year added on instead.

However, the company’s customers do not like seeing the price hikes. There is a reason for delaying this as long as possible. In 2011, 800 million customers decided to leave the service making it clear that the offers available were not worth the extra cost. Stocks plummeted after that, and it could happen again now that the company has announced its new decisions. The only thing that could save it is announcing the bigger and better options coming to the service. Netflix needs to justify its price rise for monthly subscriptions now.

By Alexandria Ingham

Sources:

Reuters

Fox News

EE

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