Netflix Raised Prices and the Stock Market Rewarded It. How Will Consumers React?
Netflix’s stock rose nearly 7% Tuesday on news that the streaming-video giant will raise its monthly subscription fees. While Wall Street seemed to welcome the move, the sentiment among Netflix subscribers was decidedly less enthusiastic.
The standard Netflix subscription will rise to $13 a month from $11 a month. A premium subscription, which doubles the number of screens that can watch at once and deliver Ultra HD video, will now cost $16 per month, up from $14. Netflix’s basic plan is jumping from $8 per month to $9 per month.
Netflix’s stock price gained $21.70 a share, or 6.5%, to $354.64 a share Tuesday following the company’s announcement of the subscription-fee increases.
Wall Street analysts were generally upbeat on the move. Piper Jaffray noted that customer surveys indicate that Netflix has some flexibility to increase its monthly fee before they abandon the service. RBC Capital Markets said much of the increase will go to finance new content that draws subscribers in each month, while SunTrust argued that the content Netflix has on tap this year is strong.
On Twitter, BTIG analyst Rich Greenfield argued that, within the context of ticket prices at movie theaters, the cost of a pricier Netflix subscription wasn’t such a bad deal.
Nonetheless, there were many Netflix viewers on Twitter who were either mulling or vowing a cancellation of their Netflix subscriptions.
Others expressed skepticism about such complaints, especially when those who can’t stomach another price increase from Netflix can piggyback on a premium subscription of a family member.
Of course, Netflix has raised its subscription fee before. Notoriously, the company botched a fee increase five years ago with the introduction of its ill-fated Qwikster service. But the company has learned from that painful episode and notched up its monthly fee since then without increasing its customer churn rate.
And for many Netflix customers, a higher monthly fee may be better than an alternative that Netflix could introduce: ads inside the streaming service. One of Netflix’s biggest draws to date is that it doesn’t have the parade of ads that plague cable-TV channels.