Netflix (NASDAQ: NFLX) has announced that it would be raising its subscription prices in the United States. The price increases will be applied to all existing subscribers over the next few months, while new members will be charged at the new rates immediately. It will be the second time in the last 15 months that the company has increased its subscription rates.
According to the announcement from Netflix, each of the company’s subscription tiers will increase in price by $1-$2. Its basic $7.99 plan will increase to $8.99, the $10.99 plan will increase to $12.99 per month, and its $13.99 plan will go up to $15.99 a month. Adding $1 to $2 to each plan would generate an additional $87 million from its more than 58 million subscribers in the U.S. Investors reacted favorably, sending Netflix stock up 6 percent after the announcement.
Increasing the price of its subscription will help the company pay for all of the new content it has been creating. The company is believed to have spent at least $8 billion last year on new content for the platform. While there were initial concerns that Netflix was creating too much programming at the expense of quality, the company has recently won several prestigious awards for several of its originals. Earlier this month, Netflix won five awards at the Golden Globes and had its biggest hit yet with “Bird Box.”
Netflix needs new content now more than ever, as several strong competitors are poised to enter the streaming market. Disney is planning to launch Disney+, which will carry its “Star Wars” and Marvel content, later this year. WarnerMedia, CNN’s parent company, has a plan to launch a three-tier service, while Apple is also likely to launch its own service sometime in the first half of the year. NBCUniversal will launch a streaming service in 2020.
