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Netflix have announced that they are increasing the cost of their most popular monthly subscription by $1, making it $9.99 per month for new subscribers. Current subscribers will be given a grace period to adjust (until October 2016), after which they will then see their subscription cost rise as well.
This is the second time in 17 months that Netflix increased its subscription costs by $1, and in 2011, an unannounced price bump saw more than 800,000 subscribers cancel their subscriptions, while the company’s stock dropped by 80% in 13 months.
Speculation as to why the company is increasing its subscription cost seems to have settled on the fact that Netflix has been aggressively producing original content such as the political drama House of Cards and the prison ‘dramedy’ Orange Is The New Black and therefore needs to take action to recoup the costs of production. In fact, Netflix is expected to invest almost $5bn into original programming in 2016 alone, a value that Ampere Analysis predicts will increase by another $1bn in the 2 years following.
At the end of Q2 2015, Netflix had amassed 63 million paying subscribers, in 50+ markets. While many subscribers won’t mind paying the extra $1, the company will generate an extra $750 million in revenue a year, which will hopefully be channeled back into producing more original content.
- Netflix raises subscription prices – streaming will now cost $9.99
- Netflix raising price for most popular plan by $1
- Netflix subscribers to reach over 130m by 2020