Netflix raises prices before its Q4 earnings report

Netflix is increasing prices for US subscribers by as much as 18%.

Netflix raising prices on phone Source: Bloomberg

Netflix is raising prices for 58 million US subscribers ahead of its fourth-quarter (Q4) earnings report Thursday.

Why is Netflix raising prices?

Netflix is implementing rate hikes in order to pay for the billions of dollars the company is spending to provide original content. The company is spending so much on content to fend off competition from upcoming streaming offerings from Disney and AT&T.

‘We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience,’ said the company in a statement.

The basic plan will increase from $ 8 to $9. The standard package that lets users watch HD content on two devices will surge to $13 from $11. The 4K Premium plan for subscribers that stream content on four devices will jump from $14 to $16. The price increases will be phased in over several months for existing members. New subscribers will get the new price plan immediately.

How will rate hikes affect Q4 earnings?

Netflix’s stock is already rising on the strength of the news about the price increases. Investors are probably confident that the increases will be worth it if the streaming company spends money to produce hits like the film Birdbox.

If Netflix’s Q4 earnings report is positive, the shares of the company should skyrocket despite the rate hikes. Financial analysts like, Eric Sheridan, said that other companies are only spending a fraction of Netflix’s money on programming, so the corporation should maintain its dominance in online content.

‘We are skeptical that Disney will take any share from Netflix in the foreseeable future given its relatively narrow focus on kids and a few brands/franchises. We also don’t think that there is a fixed market for SVOD services and users/households will likely have multiple subscriptions at the same time’, said Sheridan.

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