Netflix has confirmed that its subscription fees will be going up in the US. This comes as the streaming service continues to invest heavily in original content. All the three subscription plans offered by the company are set to increase by between $1 and $2. For example, the standard plan that goes for $11 will now change to $13 per month. Netflix notes that the price hikes will apply to all members. As for new members who are joining the platform, the prices will take effect immediately. The $8 plan offered by the company will now be going for $9 and the $14 one will cost $16 moving forward. The market received the news very positively. Netflix’s stocks were up 6% once the information came out.
For the last few years, Netflix has been investing billions in developing new original content. Last year alone the streaming service spent $8 billion on new content, marking a very important start in Netflix’s attempt to dominate the streaming industry. Netflix also announced last October that it was planning to take about $2 billion in debt in an effort to maintain growth over the coming few years. Many analysts say that the price hike could actually be influenced by this. They argue that Netflix has been taking a lot of debt in recent years and the price hike could help reduce cash flow deficit leading the streaming service towards more stability in the future.
In 2018, the company said during the last quarter of the year that it was expecting a negative cash flow of $3 billion and the projections are not expected to change even in 2019. But most analysts agree that this is not really an issue since Netflix has really made huge investments in its business. Subscriber growth has also been very good. In the recently reported figures, the company was able to reach 58 million subscribers in the US and 137 million globally. Netflix is projecting that the total number of its global subscribers will hit 147 million in the next reported figures. There are also some analysts who believe that Netflix will be able to report a significant jump in the number of US subscribers.
The new price hikes come as the online streaming industry continues to get crowded. A number of other companies are also launching streaming platforms including Walt Disney. Disney+, the streaming service from Disney, is expected to be released into the market this year. NBCUniversal has also announced that it’s going to launch its own streaming service by 2020. There are also reports that Apple is getting ready to throw its weight in this industry but the timelines of a possible launch are not yet known.
Despite this, Netflix already has a huge head start. The company’s decision to produce its own original content is a big step too in making sure that it retains its subscriber base moving forward. The price hike is unlikely to have any effect on Netflix’s growth. Besides, the hike is quite negligible and users probably won’t have an issue with it.