Investors Are Celebrating Netflix Price Hikes

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Netflix Inc. (NASDAQ: NFLX) 

Online streaming giant Netflix Inc. has announced plans to hike monthly subscription prices for 58 million customers in the United States by as much as 18 percent. Countries in the Caribbean and Latin America where the company bills in US dollars, including Belize, Uruguay, and Barbados are also expected to be hit by the hikes.



The increase, which is the largest in the company’s two-decade history, comes at a time when executives are looking for more money to settle rising content bills. “We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience for the benefit of our members,” a Netflix spokesperson said in an emailed statement Tuesday.

The most popular subscription plan that allows HD viewing on two screens, has risen to $12.99 from $10.99 a month. Netflix’s lowest subscription non-HD plan has jumped to $8.99 from a month, while its premium plan is expected to rise to $15.99 from $13.99 a month.

Despite being a dominant player in the subscription and streaming video on demand market, Netflix is feeling pressure from competitors such as Hulu and Amazon. Apple, Disney and NBC are also set to join the market and they too may give the company a run for its money. These competitors offer the same services as Netflix or intend to launch streaming platforms that could pull viewers and content from the company.

Laura Martin, analyst at asset-management and investment-banking firm Needham & Company says, “I think Netflix is in trouble when the big guys start coming after them.” However, Wall Street remains generally optimistic about CEO Reed Hastings and his team at Netflix.

On Tuesday, investors welcomed the price hike by pushing shares of the company up 6.52% to $354.64 and its market cap to $154.7 billion. The shares rose less than a fraction in premarket hours Wednesday to $355.50.

Netflix Inc. Profile

Netflix, Inc. operates as an Internet subscription service company, which provides subscription service streaming movies and television episodes over the Internet and sending DVDs by mail. It operates through the following segments: Domestic Streaming, International Streaming, and Domestic DVD. The Domestic Streaming segment derives revenues from monthly membership fees for services consisting solely of streaming content to its members in the United States.

The International Streaming segment includes fees from members outside the United States. The Domestic DVD segment covers revenues from services consisting solely of DVD-by-mail. The company was founded by Marc Randolph and Wilmot Reed Hastings Jr., on August 29, 1997 and is headquartered in Los Gatos, CA. – CNN Money



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