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Jan 15, 2019

Green is the New Black: Why Netflix is Raising Prices

By Team Stash

The price for a Netflix plan is going up: Here’s why.

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Netflix is raising prices for its streaming service, and it doesn’t need 13 reasons why.

The online streaming giant, which burned through billions of dollars in 2018, announced that it will increase prices for its memberships between 13% and 18%, marking the largest single price bump since Netflix debuted its platform more than a decade ago, and its fourth increase overall. The decision will affect more than 58 million customers in the U.S.

The cheapest Netflix plan will increase to $9 from $8, and the company’s high-end service, which streams content in ultra high-definition, will increase to $16 from $14. The new pricing strategy will take effect immediately for new customers, and will be phased in for existing customers over the next few months, according to reports.

The last time Netflix raised prices in late 2017, hundreds of thousands of subscribers canceled their subscriptions in protest, although the company still managed to increase its revenues, according to industry data.

Why is Netflix raising its prices?

Over the past decade, Netflix has seen massive growth in both users and revenue (it had 137 million subscribers as of October 2018, compared to around 40 million in October 2013), and has earned a coveted place among tech companies as a “FAANG” stock, along with Facebook, Amazon, and Google.

Over the years, Netflix has implemented price increases in order to keep up with its growing costs, and analysts say that’s the most likely reason that the company will charge more for its services. It spent around $13 billion on content in 2018, up from about $8 billion in 2017.

Here are some other possible reasons Netflix is raising its prices:

  • The company is carrying a lot of debt. Although Netflix is profitable, it has nearly $14 billion in debt, following a $2 billion bond offering in October 2018, according to the New York Times.
  • Content is expensive. Netflix pays high licensing fees for content, and is pushing for more original productions and programming, which isn’t cheap. (Think “House of Cards” and “Stranger Things.”)
  • Competition is coming. Netflix is already fighting off streaming competitors such as Hulu, Amazon, and HBO Now. Disney also announced a streaming platform that is expected to launch this year (and will subsequently pull its content from Netflix), as are Comcast, and even Apple.

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