Netflix has officially raised the prices on their standard and premium subscription tiers. A standard Netflix subscription will cost $14 a month, while a premium subscription will cost $18. This is the first time since May 2019 that the streaming giant has raised prices on subscribers. The new prices will start with current subscribers' next billing cycle, while all new subscribers will have to pay the recently raised price immediately. Shortly after the announcement, Netflix's stock went up 5%, which is an added bonus for the company.
The Netflix premium subscription tier allows for a 4K streaming option and allows four separate devices to stream at once. The standard tier does not offer the HD streaming and only allows for one device to watch at a time. The new subscription plan pricing will go towards making more original content for the streaming service, which has blazed the trail for all other streaming platforms early on. The decision to raise prices comes after the company did not meet their 2.5 million new subscribers goal in the third quarter.
Instead of the 2.5 million new subscribers, Netflix only made it to 2.2 million for the third quarter of this year. Analysts had estimated that the company could add as many as 3 million new subscribers in the first half of 2020. However, 2020 has not been a normal year for anybody. In addition, there are a lot more streaming options at the moment. From Disney+, to Amazon Prime, Hulu, Apple TV+, and more, there is just a lot more competition these days. It will be interesting to see how the streaming platform does by the end of the year, leading into 2021. A spokesperson for Netflix had this to say.
"We understand people have more entertainment choices than ever and we're committed to delivering an even better experience for our members. We're updating our prices so that we can continue to offer more variety of TV shows and films -- in addition to our great fall lineup. As always we offer a range of plans so that people can pick a price that works best for their budget."
One market analyst claims that Netflix is still underpriced because they offer "a lot of value for not a whole lot of money." This is debatable amongst subscribers, but the streaming service has gone out of their way to keep adding new titles and engaging original content over the years. While some people may end up canceling, they'll more than likely be back to check out Stranger Things season 4 or David Fincher's Mank.
Losing subscribers is obviously built into Netflix's business model. They assume that a price hike will end up in a loss, but co-CEO Reed Hastings knows that they are currently offering something that nobody else can. "When you come to Netflix you can just go from hit to hit to hit and never have to think about any of those other services," said Hastings. CNBC was one of the first outlets to announce Netflix's new price tiers.