Netflix’s price hike comes amid a surge in worldwide growth as efforts to contain the novel coronavirus closed down restaurants, theaters and other entertainment venues. The Los Gatos, California, company gained 28 million worldwide subscribers during the first nine months of the year, already eclipsing its growth for the entire year of 2019. This year’s subscriber increases included an additional 5.4 million customers in the U.S. and Canada.
But the price increases may test the bounds of Netflix’s popularity, especially if the pandemic-driven recession deepens and forces more U.S. households to curtail their spending.
After Netflix raised its U.S. prices early last year, the streaming service suffered a decline of 130,000 subscribers in the U.S. and Canada from the end of March to the end of June.
Netflix is also facing more competition than ever, including deep-pocketed rivals that include Amazon, Apple, Walt Disney and AT&T. And several of those plans are far less expensive than Netflix’s U.S. plan.
For instance, Disney’s rapidly growing streaming service charges just $7 per month for access to a library that includes some of the most beloved films of all time.
Apple’s year-old streaming service costs just $5 per month for a relatively small selection of TV series and films, but the iPhone maker is trying to extend its reach by pouring more money into programming and bundling with its some of its other services. For instance, a plan that includes video, music, video games and online storage is being offered for $15 per month, or just a $1 more than Netflix’s most popular stand-alone plan.
“We understand people have more entertainment choices than ever and we’re committed to delivering an even better experience for our members,” Netflix said in a statement. “We’re updating our prices so that we can continue to offer more variety of TV shows and films.”
The higher prices should help lift Netflix’s profits, a prospect that investors like. But Netflix’s stock fell more than 5% to close Friday at $475.74 amid another down day in the overall market. Netflix’s shares have climbed by nearly 50% so far this year, thanks largely to its robust growth amid the pandemic.
