Netflix is planning to bump up its subscription price by up to $2 for new subscribers
On hindsight, going nearly all-in with streaming was definitely the right choice for Netflix. While the company's DVD-by-mail generated $98 million during the first quarter of 2014, Netflix's streaming revenue topped $1 billion. That's a pretty big disparity and Netflix expects the gap to widen even more each quarter. At the same time, the cost of doing business isn't getting cheaper these days, and if you're thinking about joining Netflix, do it before the price goes up.
In a letter to shareholders (PDF), Netflix CEO Reed Hastings and CFO David Wells announced that a price hike is likely to occur later this quarter, however it will only apply to new members initially.
"In the U.S. we have greatly improved our content selection since we introduced our streaming plan in 2010 at $7.99 per month. Our current view is to do a one or two dollar increase, depending on the country, later this quarter for new members only," Hastings and Wells said.
As for existing subscribers, they'll stay at their current pricing, which will remain in effect "for a generous time period." The money generated from raising the price for new subscribers will help Netflix acquire more content and improve its streaming service.
Though Hastings and Wells don't come right out and say it, another reason for the price hike could be to cover costs associated with ensuring its traffic is delivered to subscribers unabated. Netflix recently inked a multi-year agreement with Comcast that guarantees the ISP won't throttle its traffic, which means far less buffering and higher quality feeds, especially during peak hours.