Netflix will indeed raise prices for new customers

By Lucas Shaw

Netflix will raise prices for new customers in the United States later this  year after testing higher rates in Ireland with “little impact,” the company  told shareholders Monday.

The rate hike comes three years after the streaming service last raised rates  to disastrous consequences. The early rate hike was part of a quickly-abandoned  attempt to split the company’s DVD-by-mail and streaming service.

The company recovered, as users fell in love with the video streaming service  that has rendered Netflix’s DVD-by-mail an afterthought.

Now Netflix is banking loyalty to its product will matter more than a dollar  or two per month. While existing Netflix customers pay $7.99 a month, new  customers will pay $8.99 or $9.99.

“Our current view is to do a one or two dollar increase, depending on the  country, later this quarter for new members only,” CEO Reed Hastings and CFO  David Wells wrote in a shareholder letter. “Existing members would stay at  current pricing (e.g. $7.99 in the U.S.) for a generous time period.”

Netflix has already tested out the price increase in Ireland, where it  noticed “limited impact.”

Analysts and media experts have long speculated Netflix would raise prices  given the rising cost of licensing and producing movies and TV shows. Though  original shows still constitute less than 10 percent of Netflix’s content  budget, chief creative officer Ted Sarandos said the company would spend  “dramatically” more as it continues to produce new shows like the “Marco Polo”  project the Weinstein Co. is making.


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