Why Netflix Can Justify Another Rate Hike

Remember when people used Netflix primarily for mail-order DVDs? Those days are long gone, but a controversy from those days could be cropping up very soon for the premier streaming media company.

Netflix recently announced it would be raising the prices of its streaming services. Again. Effective soon, standard subscribers will have to pay $10.99 per month, up a buck from that plan’s previous monthly price. Premium members will pay $13.99, a two-dollars increase from the previous rate.

Netflix chose to implement this rate hike gradually, making the price immediate for new customers, but giving current subscribers 30 days’ notice of the impending change, based on their billing cycle. This change was handled much better than Netflix’s 2014 price increase, which still stands out as a major commercial misfire. At the time, Netflix was just introducing its streaming services to a wider audience. Mail-order was their bread and butter, so the company decided to split the services up, and charge customers about double for the same service. This didn’t go over well with customers at all, who revolted and threatened to cancel Netflix altogether.

The company quickly retracted this plan, deciding instead to settle for a much smaller price increase. Quickly, customers picked up on the streaming service, and as WiFi availability increased this avenue overtook DVD rental as the preferred method of watching Netflix media. Since then, though, the value offered by Netflix has skyrocketed. The company has produced some of the most popular new TV programs year after year, and customers are increasingly happy about the content they’re paying for. Given that success, it’s not surprising to see a small price hike occurring.

When explaining the new numbers, a Netflix spokesman leaned heavily on that impressive and popular content:

“From time to time, Netflix plans and pricing are adjusted as we add more exclusive TV shows and movies, introduce new product features and improve the overall Netflix experience to help members find something great to watch even faster …”

In other words, we’re raising rates in order to make you, our customers, more award-winning original content. With successes like “Orange is the New Black,” “House of Cards,” “Stranger Things”, and a string of popular Marvel properties, Netflix subscribers likely feel they’re getting at least their money’s worth. So, the consumer reaction to this price hike is likely to be more of a shrug than a revolt.

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Ronn Torossian is CEO of 5WPR, a leading PR agency.