Streaming video giant Netflix Inc (NASDAQ: NFLX) announced on Thursday it will raise prices for U.S. customers and investors cheered the announcement.
Price increase details
Netflix’s standard subscription plan increases by $1 a month to $14 and its premium subscription plan goes up by $2 to $18 a month. However, the basic plan stays the same at $9 a month.
Netflix said in a statement obtained by CNN Bussines that it acknowledges the price increase comes at a time when consumers have “more entertainment choices than ever.” But the streaming video giant is committed to providing an “even better experience” for its subscriber base.
The statement added that the price increase will translate to more variety of TV shows and films for customers. Since the basic membership price remains unchanged, consumers still have multiple options at different price points.
Analyst: Bound to happen
Rosenblatt Securities analyst Bernie McTernan told CNN Business that a price increase was all but a certainty. The only unknown was when it would happen.
Netflix could be operating under the assumption its price increase reinforces the value of the service and content library at a time when the COVID-19 pandemic disrupted content production, the analyst also said.
The company itself acknowledged during its earnings conference call one week ago that it will “occasionally go back” and ask customers to “pay a little bit more” to ensure a consistent addition of new content.
More price increases to come
According to CNBC, Netflix customers should expect annual price increases moving forward. Investors shouldn’t find this concerning as the company’s pricing power means the stock can command a hefty premium.
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