Netflix Stocks Rise after Raising Prices for US Customers

The streaming media company is raising the prices on its standard and premium plans for US customers. Its standard plan is now $14 a month, up $1 a month from last year. Its premium subscription will go up $2 to $18 a month. Its basic plan remains unchanged at $9 a month.

Netflix’s (NFLX) stock rose 5% following the news. The new prices will take effect starting immediately for new members while current members will be notified that their subscription is going up as it rolls out over the next few months.

“We understand people have more entertainment choices than ever and we’re committed to delivering an even better experience for our members,” a Netflix spokesperson said in a statement. “We’re updating our prices so that we can continue to offer more variety of TV shows and films.”

The spokesperson added that Netflix offers “a range of plans so that people can pick a price that works best for their budget.”

Netflix’s price hike, which was first reported by The Verge, is not a huge surprise. Netflix spends billions on content, and this is a way to boost revenue as the “outlook for subscriber growth is substantially slower in the future than the past,” according to Bernie McTernan, a senior analyst at Rosenblatt Securities.

“The price increase was a matter of when not if,” McTernan told CNN Business. “It shows they think people will be willing to pay more for the service as the pandemic disrupts content production thus making their vast library more valuable.”

The news comes a week the company posted slowing growth in new subscriptions and lower-than-expected profits. This came after Netflix had a huge 2020 because of people being stuck at home during the coronavirus pandemic.

Netflix was asked about raising prices during its earnings call last week.

“The core model we have, and what we think really our responsibility and our job is, is to take the money that our members give us every month and invest that as judiciously and as smartly as we can,” Greg Peters, Netflix’s chief operating officer, said on the call.

“If we do that well… and make that efficiency and effectiveness better, we will deliver more value to our members, and we will occasionally go back and ask those members to pay a little bit more to keep that virtuous cycle of investment and value creation going.”

Netflix is the king of streaming and the moves it makes, especially in terms of cost to the consumer, reverberates throughout the market.

For example, McTernan noted that Disney’s stock had a positive reaction following the announcement of Netflix’s pricing going up. “This will give Disney+ cover to raise prices at some point,” he said.

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