Longtime Netflix subscribers will soon have to pick their poison — pay a higher monthly rate, get lower-quality streams, or cut off service entirely.
Two years ago, Netflix raised the rate for its standard monthly plan from $7.99 a month to $8.99 monthly. At the time, the company said the new rate would only apply to new customers and promised existing customers that they could keep their lower-cost plan for the next two years. In a letter to shareholders released Tuesday, company executives noted that two-year period will expire this spring.
In order to keep their same level of service, which gives them access to high-definition movies and TV shows and allows them to stream two different videos at the same time to different devices, customers will have to pay $9.99, the rate Netflix now charges for its standard plan after a second price hike last fall. They can continue to pay the $7.99 rate, but will only be able to stream video to one screen and won’t get access to HD videos.
Customers can also cancel their service, but Netflix’s executives don’t think many will.
In the second and third quarters of this year, “we’ll be releasing a substantial number of our U.S. members from price grandfathering,” Reed Hastings and David Wells, Netflix’s chief executive and chief financial officers, respectively, said in their shareholder letter. They added: “Given these members have been with us at least 2 years, we expect only slightly elevated churn.”
Netflix set off a firestorm among customers in 2011 when it effectively raised prices on both its DVD and streaming services by unbundling them and billing for them separately. Its DVD service never recovered from the move; it had just 4.9 million customers at the end of the year, compared to 24.6 million at the time of the split.
But Netflix’s streaming business quickly recovered from the brouhaha and has become a powerhouse in Internet video and Hollywood. The company’s last two price hikes caused barely a ripple among customers.
The Los Gatos company reported better-than-expected earnings Tuesday. The company’s streaming service now has more than 75 million customers worldwide.
Photo: Stock image of a couple watching Netflix (courtesy Netflix).