Netflix Set To Increase Pricing
New Netflix subscribers could soon be forced to pay a bit more for the company’s streaming service: The company announced in its first-quarter earnings letter to shareholders that it intends to raise the prices for new members by $1 or $2 this quarter.
CEO Reed Hastings and CFO David Wells wrote:
“In the U.S. we have greatly improved our content selection since we introduced our streaming plan in 2010 at $7.99 per month. Our current view is to do a one or two dollar increase, depending on the country, later this quarter for new members only. Existing members would stay at current pricing (e.g. $7.99 in the U.S.) for a generous time period. These changes will enable us to acquire more content and deliver an even better streaming experience.”
Netflix had previously said that it wanted to experiment with new pricing tiers, but didn’t seem in rush to implement any pricing changes at the time. However, the company also experimented with price increases for new members in Ireland, and the results seem to have encouraged the company to raise prices in other markets as well. Existing customers in Ireland are grandfathered into their old plans for two years, according to the letter to shareholders.
The announcement comes as Netflix ended another quarter of strong international growth. In Q1 of 2014, the company added 1.75 million international subscribers, compared to 1.02 million in Q1 of 2013. Altogether, Netflix now has 12.68 million international subscribers, compared to 7.14 in Q1 of 2013.
In the U.S., Netflix added 2.25 million streaming subscribers, compared to 2.03 million in Q1 of 2013. This means that Netflix now has 35.61 million streaming subscribers in the U.S., and a total of 48.35 million streaming subscribers worldwide.
Despite this growth, the company reported solid financials for Q1: Including all of its business segments, Netflix generated revenue of $1.07 billion in Q1 of 2014, compared to 1.02 billion in Q1 of 2013.
The company earned a net income of $53 million, compared to $3 million a year ago, in part due to much lower international losses, which fell from $77 million in Q1 of 2013 to $35 million in Q1 of 2014. The company expects to be profitable in existing international markets by the end of the year.
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