Online content provider, Netflix, will be bringing its price hikes to full circle by the end of the year, raising all monthly plans by $1.
The proposed increase will affect its current two-stream HD subscription plan, rising from $8.99 to $9.99 in the coming months. This plan was previously raised back in May 2014 from $7.99 to $8.99 for new, incoming subscribers.
Those who were already on the subscription plan were not immediately affected by the price hike, as the company offered them a two-year extended "grandfathering" option as a supposed "thank you" from the company for their continued patronage.
Netflix even made an executive decision back in April to "slowly" increase prices for current subscribers on the $7.99 plan (before May 2014) and the $8.99 plan (after May 2014) as an estimated 80 percent of its subscribers were unaware of the price hikes. The plan is to gradually increase the price, starting from newer accounts toward the longest-existing plan holders.
"We will phase out this grandfathering gradually over the remainder of 2016, with our longest-tenured members getting the longest benefit," CEO Reed Hastings describes (PDF), adding that Netflix will be "rolling this out slowly over the year, rather than mostly in May, so [they] can learn as [they] go."
However, despite the company's efforts to slowly transition its loyal customers into the new billing, as well as its relatively small increase of only $1, an expected 480,000 subscribers might be signing off from the company once the notification email for its new billing reaches its customers. Current subscription plans will be notified by an email regarding the new $9.99 two-stream HD service before the changes take permanent effect on the involved account.
The numbers were crunched by Anthony DiClemente, a Nomura analyst, who remains positive that the company's global expansion and expected revenue increase from its remaining subscribers, 27 Million currently, will offset the loss from others.
"Thematically, international net subscriber additions headwinds may be somewhat offset by a better narrative surrounding revenue benefits from price increases in the U.S. throughout the remainder of 2016," DiClemente explains.
Netflix is purportedly rolling out more original content on its platform which some reports have attributed as another reason why the company needs the extra dollar. Its main reason, on the other hand, is its "saturation" in the U.S. market, as the company expects to only add a lesser amount of new subscribers for the rest of the year.
"Longer term, we remain positive on Netflix, given our belief that the company will continue to accrue significant scale benefits as it further entrenches its position as the dominant global distributor of content," notes DiClemente.
Photo: Ross Catrow | Flickr
