Your recent Orange Is the New Black binge might have been interrupted with bad news: Netflix is about to get more expensive, if it hasn’t already. As we wrote in April, “The Standard [two-screen] option is the [streaming service’s most] popular, even after the price increased last year for everyone except existing subscribers, who were grandfathered in at $7.99.” Now everyone has to pay $9.99 for Standard, and according to Nomura Securities analyst Anthony DiClemente, some 480,000 customers may bail because of it. However, that loss in earnings will be more than offset by the price hike, “leading to about $520 million in additional annual revenue for Netflix.”
“We note that this has long been a tenet of our investment thesis on the domestic business, as slowing subscriber trends are more than offset by increased monetization,” DiClemente wrote. The analyst arrived at the estimates by assuming a 2 percent churn rate for subscribers on the receiving end of a $2-per-month price increase and a 1 percent churn rate for those whose plan would go up by $1. (Via Variety)
The extra money will go to “content spending,” from $5 billion this year to $6 billion-plus in 2017. (All that coffee on Gilmore Girls isn’t going to pay for itself.) The negative press Netflix has been receiving over the price increase is just a small bump in the road for a company that knows you’re not going to cancel your subscription over an extra two bucks a month. How else are you going to watch nine episodes of Parks and Recreation in a row at 2 a.m.?
Buy the DVDs? That’s so 2014.