USA

Netflix hikes subscription price, boosted by viewer growth

Netflix and the management style behind its success

Netflix is raising most of its U.S. prices by 8% to 13% as its video-streaming service rides a wave of rising popularity amid coronavirus-fueled lockdowns.

Under the increases imposed Friday, Netflix's most popular U.S. streaming plan is rising $1, to $14 per month. A premium plan that allows more people to watch the service on different screens simultaneously will now cost $2 more at $18 per month. Netflix's basic U.S. plan remains at $9 per month.

It marks Netflix's first price changes in the U.S. since an increase rolled out early last year.

New U.S. subscribers will be charged the higher prices immediately, while the increases will affect existing customers in phases during the next few months. Netflix ended September with 73 million subscribers in U.S. and Canada, with the overwhelming majority located in the U.S.

"[T]his indicates that the company is secure in its competitive positioning, and its value proposition, despite any potential economic uncertainty," analysts at Raymond James wrote in a note to investors.

Wall Street was expecting a price hike after Netflix raised its prices in Canada earlier this month and then ended free 30-day trials in the U.S. And the streaming company is riding a wave of popularity, as consumers sheltering at home from the pandemic turn online for entertainment. 

Netflix gained 28 million worldwide subscribers during the first nine months of the year, already eclipsing its growth for the entire year of 2019. This year's subscriber increases included an additional 5.4 million customers in the U.S. and Canada.

But the increases may test the bounds of Netflix's popularity, especially if the pandemic-driven recession deepens and forces more U.S. households to curtail their spending.

After Netflix raised its U.S. prices early last year, the streaming service suffered a decline of 130,000 subscribers in the U.S. and Canada from the end of March to the end of June.

Netflix is also facing more competition than ever, including deep-pocketed rivals that include Amazon, Apple, Walt Disney and AT&T. Several of those plans are far less expensive than Netflix's U.S. plan.

Disney's rapidly growing streaming service charges just $7 per month for access to a library that includes some of the most beloved films of all time. 

Apple's year-old streaming service costs just $5 per month. So far, Apple offers a relatively small selection of TV series and films, but company is pouring more money into programming and bundling streaming with other services. Its Apple One plan, which includes video, music, video games and online storage, costs $15 per month, or just a $1 more than Netflix's most popular stand-alone plan.

"We understand people have more entertainment choices than ever and we're committed to delivering an even better experience for our members," Netflix said in a statement.

The higher prices should help lift Netflix's profits, a prospect that investors like. But Netflix's stock fell more than 5% to close Friday at $475.74 amid another down day in the overall market.

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