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Netflix $1 increase for new members isn't a big deal

Current subscribers don't have to pay a dime more until at least 2016

Published: May 12, 2014 11:45 AM

If you're not already a Netflix subscriber, would a $1-per-month bump in price—to $9—affect your decision to join? Probably not, which is why it's a smart move by Netflix. And by letting current subscribers stay at their $8-per-month subscription for at least two years, Netflix won't have to fend off any major defections from those who are already members.

In fact, if you are currently a Netflix subscriber, nothing will really change over the next 24 months, except that you'll likely have access to even more content.

That's because Netflix is upping the amount it's spending on content as a way to differentiate its service from well-heeled competitors such as Amazon and Hulu Plus. In addition to returning original series, such as "House of Cards," "Orange Is the New Black," and "Hemlock Grove," Netflix is prepping for a steady stream of licensed content—including several TV shows and a mini-series from Marvel—that will arrive in 2015.

Netflix also has an exclusive deal with Disney that will put its movies (including Marvel Studios and LucasFilm) on Netflix eight months after they hit theaters. That deal starts in 2016—coincidentally, about the same time that Netflix will likely raise prices for current subscribers.

Netflix's price move comes a few months after Amazon raised its yearly Prime subscription fee—which essentially gives its two-day shipping customers free streaming of TV shows and movies—by $20, up to $99. After the price bump, Netflix's yearly cost for new subscribers will be $108, a negligible difference.

In fact, the bigger surprise is that Netflix is bumping the monthly fee by only a buck, since the company announced about a month ago that prices would rise by one or two dollars, and many of us assumed it would be the latter. The increase comes at a time when Netflix is not only paying more money to acquire—and produce original—content, but is also paying some of the larger Internet service providers for faster access to customers. Netflix is also the first major streaming company to offer 4K streams to those with Ultra HD TVs, another point of differentiation for the company.

We think that most people will feel the $1 increase is justified, especially if Netflix delivers some great new content along with the price hike. One of the big issues with the company's botched split of its streaming and by-mail DVD/Blu-ray businesses back in 2011 was that many subscribers felt they were paying significantly more—up to 60 percent in some instances—without getting anything more. With this minimal increase for new subscribers and a two-year price hold for current members, Netflix appears to have learned from that lesson.

—James K. Willcox

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