Netflix is about to raise prices by as much as 25%

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Source: Netflix

Last week in my post about Netflix paying Comcast for a peering arrangement I said of the cash Netflix is paying out: "...at some point you know they're going to start passing on these costs to consumers."

'At some point' turns out to be later this quarter. In it's Q1 2014 Letter to Shareholders Netflix announced it is going to raise prices "one or two dollars" depending on country. The good news is that the increase for now will be limited to new customers; existing customers will be grandfathered for "a generous time period." In the same paragraph the company points out that when they raised prices in Ireland it grandfathered existing customers for two years; that seems to be setting expectations for the amount of time existing users will get for this price hike as well.

Of course Netflix isn't directly attributing the increase to the Comcast deal and I'm sure that's not the only factor, but the letter reported a net income of $53 million in Q1 2014. In Q1 2013 net income was only $3 million and the numbers have climbed steadily every quarter since. So if profits are up, why the need for a price hike unless it's to cover some large expense it hasn't had in the past? Pure speculation on my part, of course; I don't have insider knowledge.

Netflix spends a lot of time in the letter talking up it's original programming. Upcoming (between now and the end of summer) original programming includes Season 2 of series Derek, Orange is the New Black, and Hemlock Grove, a new animated series called BoJack Horseman and the final six episodes of The Killing.

Looking farther into 2014 & 2015 new original series include Marco Polo, Marvel's Daredevil, Sense 8 from the Wachowskis, Narcos and an unnamed psychological thriller from the creators of Damages.

It's interesting that the letter spends less time on talking about the cost of acquiring new streaming licensing than Netflix's shareholder letters used to; now the emphasis is on original content.

Are you willing to pay another $1 or $2/month for Netflix? Here in the US it's $8/month now. If it went to $10 I'd probably stick with it, but I'd be more aware of it, if that makes any sense. I don't even think about that $8 even though I'm sure there have been months when I didn't watch anything (Netflix gets the most use in our house during re-run season). At $10 I'd be more apt to stop and start my subscription based on whether I was actively using it.

What about you?

Read more of Peter Smith's TechnoFile blog and follow the latest IT news at ITworld. Follow Peter on Twitter at @pasmith. For the latest IT news, analysis and how-tos, follow ITworld on Twitter and Facebook.

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