Netflix is launching price hikes today for its US subscribers, increasing its standard plan to $ 14 per month and the premium level to $ 18 per month.
The new Standard plan price is a $ 1 increase (from $ 13 a month), while the new Premium tier cost is a $ 2 increase (from $ 16 a month). New subscribers will have to pay updated monthly fees, while existing subscribers will see the new prices in the next few weeks as they roll out along with the customer’s billing cycles.
Industry insiders have long predicted another round of price hikes on Netflix, which recently increased its subscription fees in the US in January 2019. Recently, Netflix has raised the cost of some plans in Canada. Netflix is making price changes by country, and the change “in the US does not affect or indicate a global price movement,” said a Netflix spokesman The Verge.
The price increase also comes at a time when people have more entertainment options than ever before – especially in the United States. A few years ago, Netflix’s biggest competition in the streaming space was Hulu, and the company competed for people’s attention by playing video games, watching YouTube, and sleeping. Now the United States itself has HBO Max, Disney Plus, Peacock, TikTok, YouTube, Twitch, and Fortnite. Oh, and sleep is still a factor. Netflix is aware of this. Prices are being updated “so that we can continue to offer a greater variety of TV shows and movies,” the spokesman said The Verge.
“As always, we offer a range of plans so people can choose a price that best fits their budget,” the spokesman added.
Price increases also come when Netflix wants to invest more in its content offering and product features. Netflix has increased its annual content budget each year over the past seven years by spending once estimated at $ 18.5 billion in 2020 alonealthough that may have changed this year due to the pandemic. Increased competition means Netflix has to constantly improve its game to make sure it has both high-quality content and tons of it, while also working to improve the actual platform. It costs money, and as a result, prices rise.
Questions about the price hike arose during Netflix’s recent earnings talk this month. Greg Peters, Netflix chief operating officer and chief product officer, said that when a company invests more in both content and technology development, “sometimes they come back and ask [customers] pay a little extra to maintain this positive cycle of investment and value creation ”. While its competitors’ prices have no effect on Netflix, its new standard price is only $ 1 lower than the HBO Max 15 monthly fee, according to a person familiar with the matter, a fee that many analysts said was too high for consumers.
At that time, analyst Ross Benes, who deals with Netflix eMarketer, He said The Verge that Netflix is still affordable. He added that people get “great value for not much money.” It’s because of all these different factors, and since Netflix has become an even more central streaming service in people’s lives during a pandemic, Netflix may ask for an extra dollar a month and people will pay.
“Some may cancel, but I bet it will pay off,” added Benes.
Netflix executives like CEO Reed Hastings have also come to terms with losing some customers – something the industry calls churn. Hastings told analysts during the company’s second-quarter earnings call in July that people might leave Netflix from time to time to subscribe to other streamers. The goal, however, was “to have so many hits that you know when you come to Netflix you can just go from hit to hit and never think about any of those other services.” It becomes costly – quickly – to create this constant streak of hits that persuades people to sign up and stay, and that’s part of what drives prices up.