Netflix Will Indeed Raise Prices for New Customers

Netflix will increase rates by $1 to $2 monthly under plan already tested in Ireland

Last Updated: August 4, 2014 @ 10:17 AM

Netflix will raise prices for new customers in the United States later this year after testing higher rates in Ireland with “little impact,” the company told shareholders Monday.

The rate hike comes three years after the streaming service last raised rates to disastrous consequences. The early rate hike was part of a quickly-abandoned attempt to split the company’s DVD-by-mail and streaming service.

The company recovered, as users fell in love with the video streaming service that has rendered Netflix’s DVD-by-mail an afterthought.

Now Netflix is banking loyalty to its product will matter more than a dollar or two per month. While existing Netflix customers pay $7.99 a month, new customers will pay $8.99 or $9.99.

Also read: ‘House of Cards’ Helps Netflix Add 4 Million New Subscribers in Q1

“Our current view is to do a one or two dollar increase, depending on the country, later this quarter for new members only,” CEO Reed Hastings and CFO David Wells wrote in a shareholder letter. “Existing members would stay at current pricing (e.g. $7.99 in the U.S.) for a generous time period.”

Netflix has already tested out the price increase in Ireland, where it noticed “limited impact.”

Also read: Netflix CEO Reed Hastings Hints at Pricing Changes in Letter to Investors

Analysts and media experts have long speculated Netflix would raise prices given the rising cost of licensing and producing movies and TV shows. Though original shows still constitute less than 10 percent of Netflix’s content budget, chief creative officer Ted Sarandos said the company would spend “dramatically” more as it continues to produce new shows like the “Marco Polo” project the Weinstein Co. is making.