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Netflix to raise "grandfathered" plan prices after Q4 earnings

by on21 January 2016

Price hike begins in 2H 2016 for "Standard" 1080p subscribers

In a recent letter to shareholders, the company announced its earnings for Q4 2015, showing a $36.7 million profit year-over-year and warning its grandfathered subscribers on the $7.99 price for “Standard” 1080p service that they can expect a price hike starting in the second half of this year.

The move underscores the company’s intentions to boost capital income as it finalizes plans to launch service in every country around the globe except for one. The streaming media giant is warning its US members grandfathered on the “Standard” $7.99 HD plan (1080p, supports 2 viewers at once) that they can keep their plans for $2 dollars more at $9.99 per month, or simply be downgraded to the SD plan (480p, supports 1 viewer) for the same price. In short, this means 1080p customers in the US will pay $24 more per year to keep their subscriptions, or $120 per year. Meanwhile, for just $2 dollars more the company offers a “Premium” 4K Ultra HD plan (supports 4 viewers at once) at $11.99 per month, or $144 per year.

netflix us pricing 2016

Source: - Standard "grandfathered" $7.99 subscribers to pay $2 more later this year

This is not the first time the company has raised prices unexpectedly. In May 2014, prices for new users went up from $7.99 to $8.99 per month for its “Standard” HD 1080p plan. In October 2015, the company hiked prices for new users again from $8.99 to $9.99 per month for the same plan.

Four months ago in September 2015, Netflix launched service in Japan, followed by Spain, Portugal and Italy in October. At CES 2016, the company announced the availability of Netflix everywhere in the world except for China. The move expanded Netflix coverage to over 550 million homes worldwide. Over the next few years, the company specifically plans to target “outward-looking, affluent consumers with international credit cards and smartphones,” according to the latest earnings statement.

The company is also seeing increased adoption of its $11.99 4K Ultra HD plan as more 4K TVs are purchased and as Netflix remains the leading source of Ultra HD content for consumers. Thankfully, the Ultra HD plan will not be affected by a price increase.

netflix q4 2015 earnings

Source: Netflix via (Netflix Q4 2015 Letter to Shareholders)

In the fourth quarter of 2015, Netflix membership grew by 5.59 million members to 74.76 million, up from 4.33 million new members in the same quarter a year earlier (Q4 2014). For Q1 2016, the company is forecasting 6.10 million new members versus 4.88 million in the same quarter a year earlier (Q1 2015).

The company finished Q4 with debt of $2.4 billion, unchanged from the prior quarter, and with cash and equivalents and short-term investments of $2.3 billion.

Last modified on 21 January 2016
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