Netflix’s largest ever price increase in the US has left the rest of the world holding their breath in anticipation of similar increases in their respective regions. On 15 January Netflix increased its prices by anywhere from 13 to 18 percent. Its most popular plan went from $11 to $13.
While users were undoubtedly unhappy with the increase, stock market investors appeared to have the opposite reaction. The company’s stock increased by almost 7 percent, bringing the cost of stock to $355.50. Experts predicted that the streaming giant will see around $1bn in extra revenue in the coming year as a result of the increases.
Prices have increased across the board, with the cheapest plan going up to $9 per month. Netflix’s premium plan, offering ultra-HD viewing, will go up by $2 to $16.
The price increases come as Netflix continues to expand its library of original content. The company has to fund these projects somehow, and its reasoning is that since customers tend to enjoy Netflix Originals, they’d be happy to pay for it.
Investors seem to agree with this line of reasoning, despite the company’s growth slowing in 2015 after a separate price increase. A similar increase in 2017, however, had little to no impact on growth, with Netflix gaining 24 million subscribers that year.
However, it’s not all happy-go-lucky over at Netflix. Debt is rife at the company, it borrowed $2bn in October of last year, as well as spending $3bn of its own money. Competition from companies such as Amazon and Disney is fierce, so Netflix needs to spend money if it wants to stay ahead of the pack.
Speaking about Netflix and its original content, chief content officer Ted Sarandos said: “Our own original shows tend to be more valuable than licensing someone else’s shows in later windows.”
“So, when we invest in an original show, we find we’re having a better payback in terms of people watching and appreciating Netflix and valuing their subscription. So that’s why we’re leaning in that way.”
We will have to wait and see if Netflix reveals any plans to increase costs across the rest of the world.