Netflix Raises Rates in U.S.

(Image credit: Netflix)

Netflix will raise rates on its most expensive and popular tiers in the U.S. beginning Thursday, the company announced, though it will leave its least-expensive tier at $9 a month. 

The company’s premium tier will jump to $18 a month, up $2. The most popular tier, the company’s standard plan, will rise a dollar, to $14 a month, the company said. 

Analysts expected the move. In a note to investors in September, Jefferies analyst Brent Thill said a hike is “probable in the near- to mid-term.”

Also read: Netflix Price Hike ‘Probable in the Near- to Mid-term,’ Analyst Says

The changes were foreshadowed in the company’s earnings call earlier this month, when co-CEO Reed Hastings and other executives responded to analyst questions by saying they anticipated hikes in various markets that would be re-invested in additional content acquisition and production in what they termed a “virtuous cycle” that increased customer satisfaction and acquisition, and reduced churn. 

The company will “occasionally go back and ask [customers] to pay a little bit more to keep that virtuous cycle of investment and value creation going,” Netflix COO and Chief Product Officer Greg Peters said during the earnings call.  

The latest hikes are the first in nearly two years in the U.S. Some Canadian plans were bumped up earlier this year, but a company spokesperson told The Verge that the U.S. increase “does not influence or indicate a global price change.”

The increase comes the same day as Comcast announced quarterly earnings that included the announcement that its hybrid AVOD/SVOD service Peacock now has nearly 22 million subscribers, up from 10 million in Q2, when it had a limited launch on Comcast-owned pay TV services. 

Netflix, by comparison, has more than 195 million subscribers globally, adding more in the first three quarters of 2020 than it did in all of 2019 thanks to pandemic-fueled programming demand. 

Even with the increase, Netflix remains cheaper than HBO Max, which launched this spring at the same $15-a-month price as its pay-TV premium channel namesake. Other newcomers remain significantly cheaper, but with far less new original programming, thanks to pandemic curbs on production of new shows that many of the services had planned. 

The pandemic also caused halts in Netflix production in many parts of the world, but that also  helped the company book what’s expected to be $2 billion in positive free cash flow this year, Netflix said, though it expects to revert to negative free cash flow next year as production resumes on more than 200 series and feature-length projects. 

The company is projected to spend more than $18 billion this year on programming from around the world, and more than that next year.

David Bloom

David Bloom of Words & Deeds Media is a Santa Monica, Calif.-based writer, podcaster, and consultant focused on the transformative collision of technology, media and entertainment. Bloom is a senior contributor to numerous publications, and producer/host of the Bloom in Tech podcast. He has taught digital media at USC School of Cinematic Arts, and guest lectures regularly at numerous other universities. Bloom formerly worked for Variety, Deadline (opens in new tab), Red Herring, and the Los Angeles Daily News, among other publications; was VP of corporate communications at MGM; and was associate dean and chief communications officer at the USC Marshall School of Business. Bloom graduated with honors from the University of Missouri School of Journalism.