Netflix price increase could cost the streaming service subscribers

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Many Netflix subscribers received a dreaded email this month or last: After hearing about an imminent price hike for the last two years, it has finally arrived.

And it could cost the streaming company hundreds of thousands of subscribers.

The price for a standard plan — two screens at a time plus high definition content — has increased from $7.99 to $9.99. The change goes into effect next month for most subscribers. Up until this point, standard memberships were grandfathered in at the $7.99 price. All new subscribers have been paying $9.99.

An analyst with Nomura said Netflix could lose as many as 480,000 subscribers in the U.S. as a result. That being said, Netflix has about 27 million subscribers in the country, so the turnover rate will be more than enough to offset by the $520 million a year in revenue Netflix is to gain from the increase.

“Thematically, international net subscriber additions headwinds may be somewhat offset by a better narrative surrounding revenue benefits from price increases in the US throughout the remainder of 2016,” said Anthony DiClemente, with Nomura, as reported by MarketWatch. “Longer term, we remain positive on Netflix, given our belief that the company will continue to accrue significant scale benefits as it further entrenches its position as the dominant global distributor of content.”

Shares of Netflix did dip after news of the increase went out, but analysts feel Netflix will be fine in the long term.

“It’s going to feel like peeling off a Band-aid over a seven- or eight-month period,” Wedbush Securities analyst Michael Pachter told TheStreet.com.

Andrew Dodson

Andrew Dodson is a journalist from Michigan who writes for MLive.com, the state's top online news source. Email him at andrewdodson@streamingobserver.com.
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