news 6 months ago

Netflix Raising Subscription Prices By Double Digits; Stock Soars

Deadline — Dade Hayes

Netflix is raising subscription prices by 13% to 18%, the steepest increases since the company began streaming video more than a decade ago.

The increases will take effect immediately for new subscribers and will be phased in over three months for existing subscribers. The move comes two days before the company releases quarterly earnings and during a period of momentum for its stock, which has gone up nearly 40% in 2018 to date.

Investors reacted positively to the news, sending shares up nearly 7% to $354.85 in early trading. The stock has generally shrugged off any customer blowback from past price hikes. The new round of increases is the fourth for Netflix and the first since late 2017.

The least expensive Netflix plan, Basic, will now cost $9, up from $8. The company’s most popular option, HD Standard, will now cost $13, up from $11, while 4K Premium plan will cost $16, up from $14. Customers in about 40 Latin America countries where Netflix bills in U.S. currency will also be affected, excepting key international markets such as Mexico and Brazil.

As of its last quarterly report, Netflix had 137 million subscribers worldwide, including 58 million in the U.S. It has recently seen positive results from programming like the film Bird Box, its most viewed original movie yet.

“We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience,” the company said in a statement to the Associated Press.

The hike comes during a period when streaming options are continuing to multiply. NBCUniversal said yesterday it is entering the fray, though with an emphasis on ad-supported, free streaming. Disney and WarnerMedia are prepping major subscription launches for the end of this year. Apple is also expected to join the battle, but has kept its plans ultra-secretive to this point.

Netflix’s strategy has been to aggressively spend on content. Its annual spend is now north of $12 billion, but it is not yet being offset by subscription and other revenue, leaving the company in debt. Last October, it borrowed another $2 billion in a bond offering.

While many observers and competitors see a potential meltdown for Netflix coming, there are a lot of bullish investors propping up the stock. Last week, the company’s stock received a couple of upgrades and target price increases from analysts. One of them, Eric Sheridan, wrote in a research note that he sees “the moat widening” around Netflix’s massive tower of programming, given that rivals are spending only a fraction and are constrained by linear timeslots and traditional media norms.

“We are skeptical that Disney will take any share from Netflix in the foreseeable future given its relatively narrow focus on kids and a few brands/franchises,” the analyst wrote. “We also don’t think that there is a fixed market for SVOD services and users/households will likely have multiple subscriptions at the same time.”