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Netflix is raising prices by 13% to 18% resulting in over 6% rise in their stock

Jan 15, 2019, 3:40 pm

Fans of Netflix will have to pay more now as Netflix has raised its price again by 13% to 18%, an increase that surpasses all its price hikes since its launch 12 years ago. Netflix’s 4th price hike has resulted in the company’s stock rising up more than 6 percent in a trade early this morning. The company last raised rates in October 2017 whereby its shares rose 3 percent.

Netflix’s Basic plan would now cost $9 (as increased from $8), HD Standard plan would cost $13 as opposed to the earlier $11, and the 4K Premium plan would be $16 instead of $14.

The new rates will take effect immediately for new customers, while for existing subscribers the increased prices will be incorporated into their bills over the next three months.

Comcast-owned NBC Universal recently announced its plans to launch a new streaming service in 2020, which would moreover be free and supported by advertising for users with a pay-TV account, and for non-pay-TV users, the service would cost around $12 per month. Disney, too, has plans to launch its Disney+ service later in 2019 itself.

Among newly emerging competitors, the increase in revenue can be beneficial for Netflix regarding the company paying for its investment in original shows and films and paying off the substantial debts it incurred after fending off streaming threats from Disney, Apple, and Amazon.

It is also to be noted that Netflix’s previous rate hikes have had little effect on subscriber growth, and have actually helped in diversifying and increasing the stock. Netflix reported that in the last quarter, the domestic subscriber count totaled around 58 million in the United States and more than 78 million subscribers elsewhere. Moreover, after gaining almost 40 percent of FAANG stocks in 2018, Netflix was declared the best performing of the so-called FAANG stocks that year, due to which it surpassed the likes of Facebook, Amazon, Apple and Google-parent Alphabet.

Analysts at Goldman Sachs further reckoned that Netflix would encounter strong earnings (a 20 percent raise for its stocks) in the fourth-quarter results this year. Netflix has already gained 30 percent in the first few weeks of 2019.

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