Netflix customers should prepare to open their wallets this summer as the streaming video service is expected to raise prices by a few dollars around July.
Netflix CEO Reed Hastings said the increase that will be dealt out to the company's 36 million subscribers will be used to improve the site and help pay for more original programming. New subscribers will have to pay $1 to $2 a month more for the company's $7.99 streaming video services later this quarter. Current subscibers won't be affected immediately.
"When we look at the shows and movies that we will be able to get if we have a bigger budget, it's exciting," Hastings said. "We want to make the service better and better so more people will join."
The news was released during the company's first quarter earnings report. When the price hike goes into effect it will be the first time in three years that the company has increased its fee. There is a distinct possibility the increase could lead to a negative hit to Netflix's subscriber base. It has been estimated that 800,000 people dropped the movie service after its 2011 increase. Eventually its subscriber base dropped to 23.9 million as a result of the increase. This had the impact of scaring off investors, leading to a disastrous 80 percent drop in its stock price.
These moves were also made against a generally very poor financial situation in place during that time.
"The timing may not be as precarious as it was last time," said S&P Capital IQ analyst Tuna Amobi. "They designed it to do the least amount of damage and protect themselves with potential upside."
Netflix added 2.25 million subscribers during the first quarter.
For those who remember that Netflix got its start as a mail-order DVD business, only 6.7 million DVD customers remain, down from 13.9 million in 2012. The company will not raise its DVD rental prices.
