Netflix Buries This News in Its Latest Shareholder Newsletter: Price Increase of Up to 25% Is Coming

Apr 22, 2014  •  Post A Comment

It took until about word 2,000 in Netflix's latest 2,400-word newsletter to shareholders that we found out that the company is planning a price increase.

In the newsletter, published online yesterday, April 21, 2014, Nexflix CEO Reed Hastings and CFO David Wells wrote, at the very end of a sub-section called "Product," the following:

"As expected, we saw limited impact from our January price increase for new members in Ireland (from €6.99 to €7.99), which included grandfathering all existing members at €6.99 for two years. In the U.S. we have greatly improved our content selection since we introduced our streaming plan in 2010 at $7.99 per month. Our current view is to do a one or two dollar increase, depending on the country, later this quarter for new members only. Existing members would stay at current pricing (e.g. $7.99 in the U.S.) for a generous time period. These changes will enable us to acquire more content and deliver an even better streaming experience. [Bold text done by Netflix]"

In talking about Netflix's impending price increase, Bloomberg wrote, "Netflix, which now has 48.4 million streaming subscribers worldwide, announced the new prices, along with quarterly results, on its website today. The company predicts it will sign up 1.46 million new subscribers this quarter, including about 520,000 in the U.S."

The Bloomberg story adds: "The company, the world’s largest online-subscription service, ran afoul of customers three years ago when it split its DVD-by-mail business from streaming and increased prices by 60 percent for people who wanted both. Adding $2 to the current price amounts to a 25 percent increase."

Bloomberg also notes: "Netflix rose 6.5 percent to $371.19 in extended trading after the announcement. The stock gained 0.8 percent to $348.49 at the close in New York and has retreated almost 20 percent from its closing high of $454.98 set on March 4."

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