The TV Answer Man!

Why Netflix’s Price Increase Is a Mistake

News Analysis
Netflix announced today that it’s raising monthly subscription prices for its two most popular plans.

Effectively immediately for new customers, the home video service is charging $10.99 a month for its High-Definition plan with two streams, up $1 from the previous fee of $9.99 a month.

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The new increase will be added to the monthly bills of existing subscribers over the next several months. Subscribers will get at least 30 days notice of the increase, the company said.

In addition, Netflix said it’s raising the price of its four-stream 4K plan from $11.99 a month to $13.99 a month. Again, the increase is effective now for new subscribers, but will be added soon for existing customers.

Netflix, which hadn’t raised prices for two years, is largely blaming the cost of acquiring original programming for the fee hikes. The company has committed to spending billions on such original content as House of Cards, Orange Is the New Black and Narcos.

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“From time to time, Netflix plans and pricing are adjusted as we add more exclusive TV shows and movies, introduce new product features and improve the overall Netflix experience to help members find something great to watch even faster,” Netflix said today.

It says here that most existing subscribers will support the new price increase for the two-stream HD plan, albeit begrudgingly. At $10.99 a month, Netflix is still a good value, offering more varied and original content than its top rival, Amazon Prime.

But I predict the $2-a-month increase for its four-stream, 4K plan will cost Netflix a significant number of 4K viewers. At $14 a month, the plan is now overpriced for two reasons:

1. Although Netflix plans to expand its 4K lineup with original programs, the current 4K lineup is still quite sparse, particularly compared to shows in High-Definition.

2. The picture quality of Netflix’s 4K titles (and, for that matter, most 4K titles, regardless of the source) is only incrementally better than high-def.  And sometimes, depending upon production values and Internet connections, the picture quality is worse.

Add the two together and Netflix is making a serious mistake in raising the price of the 4K plan. Some subscribers may stay on for the ability to stream Netflix on four devices at the same time, but those who joined for 4K will have serious doubts.

Final note: As I wrote yesterday, most companies in the 4K industry are now working to lower prices, not raise them.  Netflix should revisit its decision to charge $14 a month for the privilege of watching a smattering of titles in 4K.

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— Phillip Swann