Friday, October 31st7.9°C
23888
23371

Netflix to raise monthly prices for new subscribers by $1 or $2 to buy more shows, movies

SAN FRANCISCO - Netflix is preparing a sequel unlikely to be a hit with its subscribers. The Internet video service is about to raise its prices for the first time in three years to help pay for more Internet video programming such as its popular political drama "House of Cards."

The increase, to take place sometime before July, will hike prices by $1 or $2 per month for new customers. The company's nearly 36 million current subscribers will continue to pay $8 per month for at least the next year, Netflix CEO Reed Hastings said in a Monday interview.

"When we look at the shows and movies that we will be able to get if we have a bigger budget, it's exciting," Hastings told The Associated Press. "We want to make the service better and better so more people will join."

Netflix announced the looming price increase as part of a solid first-quarter earnings report.

Financial pressures have been mounting on Netflix as it grapples with the rising costs of licensing compelling video for its service. The company has been spending more to compete against traditional cable-TV channels such as HBO and Showtime, as well as technology companies such as Amazon.com Inc., Hulu.com, Microsoft Corp. and Yahoo Inc., which are planning to buy more Internet video programming from Hollywood studios.

"I think they need to raise the price to remain profitable," Wedbush Securities analyst Michael Pachter said of Netflix.

Amazon recently raised the price of its Prime service, which includes an expanding Internet video library, from $79 to $99 annually.

Investors evidently like the prospect of Netflix bringing in more revenue. Netflix's stock surged $23.01, or 6.6 per cent, to $371.50 in extended trading after the company announced its plans.

Price increases pose a risk for Netflix. The Los Gatos, Calif., company was stung by a customer backlash in 2011, when it boosted rates by as much as 60 per cent for U.S. customers who wanted to continue to subscribe to both its Internet video and DVD-by-mail services.

Netflix lost about 800,000 subscribers after the 2011 pricing change was announced, rattling investors so much that the company's stock plunged more than 80 per cent before starting to rebound in August 2012. The shares hit a new peak of $458 last month before sliding amid investor concerns that some technology stocks had soared too high, too quickly. Netflix's market value nearly quadrupled last year.

The upcoming price increase is coming in a much different situation than the last one. Besides giving current subscribers an extended grace period, Netflix has more firmly established itself as the Internet's equivalent of HBO with an expanding slate of programming that can only be found on its service.

The economy also is in better shape than three years ago, lessening the pain to people's pocketbooks, said S&P Capital IQ analyst Tuna Amobi.

"The timing may not be as precarious as it was last time," Amobi said. "They designed it to do the least amount of damage and protect themselves with potential upside."

The company ended March with 35.7 million Internet video subscribers in the U.S. after adding another 2.25 million customers in the country during the first quarter. That's up nearly 50 per cent from 23.9 million U.S. subscribers in July 2012 while the company was still trying to sooth customers irked by the last price increase.

The company attracted another 1.75 million subscribers in Canada and overseas, leaving it with 12.7 million international customers.

Meanwhile, Netflix's DVD-by-mail service is slowly dying. Through March, Netflix had 6.7 million DVD customers, a 52 per cent drop from 13.9 million just two years ago. Netflix isn't changing its DVD prices, despite rising postal costs.

Netflix's comeback has been propelled by the company's increasing emphasis on exclusive programming such as "House of Cards," an acclaimed series starring Kevin Spacey as a cunning politician with a ruthless plan to become President of the United States. Netflix released all 13 episodes in "House of Cards'" second season on Feb. 14, midway through the first quarter.

Another popular Netflix series, "Orange Is The New Black," is returning with new episodes June 6, toward the final month of the current quarter.

Even with "Orange Is The New Black," Netflix is only expecting to attract 511,000 U.S. subscribers from April through June before prices rise for new customers. That would be down from an increase of 630,000 U.S. subscribers at the same time last year.

Netflix Inc. earned $53 million, or 86 cents per share, during the first three months of the year. That compared to $2.7 million, or 5 cents, last year. The latest quarterly earnings exceeded the average estimate of 81 cents per share among analysts surveyed by FactSet.

Revenue rose 24 per cent from last year to $1.3 billion to match analyst projections.

The Canadian Press


Read more Business News




Recent Trending




Today's Market
S&P TSX14458.69-68.88
S&P CDNX771.65-9.42
DJIA17195.42221.11
Nasdaq4566.138+16.912
S&P 5001994.65+12.35
CDN Dollar0.8920-0.0014
Gold1176.50-22.10
Oil80.50-0.40
Lumber322.40-1.20
Natural Gas3.715+0.066

 
Okanagan Companies
Pacific Safety0.11+0.01
Knighthawk0.01-0.005
QHR Technologies Inc1.150.00
Cantex0.045-0.015
Anavex Life Sciences0.1711-0.0089
Metalex Ventures0.0350.00
Russel Metals32.22-0.35
Copper Mountain Mining1.97-0.05
Colorado Resources0.14+0.005
ReliaBrand Inc0.012-0.004
Sunrise Resources Ltd0.05+0.025
Mission Ready Services0.375+0.005

 





FEATURED Property
2120518#100 - 1553 Harvey Avenue
3 bedrooms 2 baths
$225,000
more details
image2image2image2
Click here to feature your property
Please wait... loading


Empty nesting: financial issues

Now that the children have ‘left the nest’, it is a good time to step back and take stock of your financial situation. Being on your own will probably cut household costs to some extent, b...


Keep your haunted home safe

Eerie sounds, spooky lights and Jack-o’-lanterns aglow—extra efforts at Halloween will keep visitors coming back for both tricks and treats. However, to keep the fun going, it’s imp...


What I learned in China

Photo: ContributedI will never be an expert on China. It is just too big, too complex and too old with layers of history and meaning that would take several lifetimes to unravel. As I said to my hosts...

_








Member of BC Press Council


23691