While Netflix customers have been angry to learn that the monthly subscription rate is going to be a dollar or two higher, they should prepare themselves for more price hikes.
The price increases last week will see $9.99 subscribers at $10.99 and $11.99 subscribers at $13.99 in November (while $7.99 subscribers will be the same). As Netflix grows, customers should not be surprised if the price increases more according to The Motley Fool.
As Netflix competitors are priced higher than Netflix, streaming mogul has room to increase prices without a real risk of losing long-time customers. For example, CBS’ Showtime over-the-top service costs $11 per month and Time Warner’s HBO Now costs $15 per month.
What is more is that the critically-acclaimed projects Netflix produces and higher quality, more people are sure to stick around during this inevitable price hike.
While this month’s pricing is the third time that Netflix has raised subscription rates in the U.S., the company is raising prices in mature markets, like Canada and Australia.
Only raising rates in mature markets will ensure that it will see growth with lower-priced customers. Their higher-priced markets will subsidize lower-priced markets and allow Netflix to produce award-winning content, grow and fight the mountain of debt. Producing original content is not cheap, and the company says that they expect to burn $2 billion to $2.5 billion per year.
With 50 million subscribers in the U.S., investors can see a $600 million additional revenue next year.