Netflix plans to hike prices for new subscribers

Netflix is preparing a sequel unlikely to be a hit with subscribers — the internet video service is about to raise its prices for the first time in three years to help pay for more programming such as its popular political drama House Of Cards.

The increase, to take place some time before July, will raise prices by €1 or €2 a month for new customers. The company’s nearly 50m subscribers will continue to pay €7.99 at the present rate for at least the next year, Netflix chief executive Reed Hastings said.

“When we look at the shows and movies that we will be able to get if we have a bigger budget, it’s exciting,” Mr Hastings said. “We want to make the service better and better so more people will join.”

Netflix announced the looming price increase as part of a solid first-quarter earnings report.

Financial pressures have been mounting on Netflix as it grapples with the rising costs of licensing compelling video for its service. The company has been spending more to compete against cable TV channels such as HBO and Showtime, as well as technology firms such as Amazon, Hulu, Microsoft, and Yahoo, which are planning to buy more internet video programming from Hollywood studios.

“I think they [Netflix] need to raise the price to remain profitable,” said Wedbush Securities analyst Michael Pachter said.

Price increases pose a risk for Netflix. The California company was stung by a customer backlash in 2011, when it boosted rates by as much as 60% for US customers who wanted to continue to subscribe to both its internet video and DVD-by-mail services.

Netflix lost about 800,000 subscribers after the 2011 pricing change was announced, rattling investors so much that the company’s stock plunged more than 80% before starting to rebound in August 2012.

Netflix’s market value nearly quadrupled last year. It ended March with some 35.7m subscribers in the US and 12.7m international customers. Netflix’s comeback has been propelled by increasing emphasis on exclusive shows such as House Of Cards, an acclaimed series starring Kevin Spacey as a cunning politician with a ruthless plan to become president of the US. Netflix released all 13 episodes in its second season on February 14. Another popular series, Orange Is The New Black, is returning with new episodes on June 6.

Netflix earned $53m (€38m) during the first three months of the year, compared to $2.7m last year. Revenue rose 24% to $1.3bn to match analyst projections.