On Thursday, Netflix said that it would raise the price of its standard subscription in the US by $US1, from $US8.99 to $US9.99 per month.
But in May 2016, many Netflix subscribers in the US will actually find themselves shelling out $US2 more each month to stream “The Unbreakable Kimmy Schmidt” and “House of Cards.”
That’s because these members have been paying Netflix only $US7.99 per month, thanks to a two-year grace period the company gave existing members when it last raised prices, which was by $US1 in May 2014.
Netflix’s most recent price hike gives existing members a one-year grace period — but only if they’re not already, in the words of the company, “benefiting from a previous price guarantee.”
Netflix confirmed to Tech Insider that that guarantee refers to the one given in May 2014, so people who didn’t see their prices go up then would see their rates increase next May.
Here’s Netflix’s full statement about the price increase (emphasis ours):
To continue adding more TV shows and movies including many Netflix original titles, we are modestly raising the price for some new members in the U.S., Canada and Latin America. As a thank you to existing Netflix members — who aren’t already benefiting from a previous price guarantee — we will maintain their current price for a year.
Netflix, it should be noted, has been very transparent and generous about price increases. Just compare the way to your cable or satellite company, which seems to add fees and raise rates yearly (or even at random times) without any explanation.
Plus, Netflix is still a great deal for most people even if it costs $US9.99 per month. The company is constantly adding new original and exclusive shows that you can’t see anywhere else.
That said, subscribers who’ve been paying $US7.99 per month for the standard plan for will see a 25% price increase when their rates go up.
Instead of paying around $US96 per year to stream Netflix, they will be paying around $US120.
Netflix only makes money from subscriptions, and the company spends an increasing amount of money each year on creating and licensing programs to stream, so it needs to increase prices and add new members to cover costs and keep making money.
Tony Wible, an analyst at Janney, estimates that Netflix will spend more than $US5 billion on programming next year.
Netflix has also become a lot more savvy in terms of raising rates. The company has recovered from near implosion in 2011, when Netflix raised rates for many members by more than as 60 per cent and then spun off its DVD program into an ill-fated company called Qwikster.
In response, many customers quit, the stock tanked, and Reed Hastings, the CEO and co-founder, publicly apologised.
Here are the different streaming plans Netflix currently offers:
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