Netflix to raise US subs prices by up to 18%, the highest ever hike

Netflix is raising its US subscription prices by 13% to 18%, its biggest increase since the company launched its streaming service in 2007.

It’s most popular price plan, which offers access to high-definition programming for two different internet-connected devices at once, will see the largest price jump going from $10.99 to $13.99 per month.

The price for the cheapest plan is going up to $8.99 from $7.99 per month, while a premium plan offering will jump to $15.99 from $13.99.

New Netflix members will be the first to be hit with the prices in the US, while existing subscribers will be moved to new price plans over the next few months.

The price increases will also be rolled out across countries in Latin America, including Uruguay, Barbados and Belize. It will not affect the region’s biggest markets Mexico and Brazil.

The news follows Netflix’s announcement that it would roll out a price hike to Canadian streamers on 11 February, which will see its basic package go up from C$8.99 to C$9.99, and its high-definition on two devices package go up from C$10.99 to C$13.99.

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

Reducing debt

As SVOD providers continue to spend astronomical figures for content on their platforms, particularly as the market becomes increasingly more fragmented, they are having to think up methods to reduce their debt.

So far, companies from AT&T to Netflix and Hulu have either planned to do this through new ad-supported methods or price hikes in subscription price.

AT&T, which is particularly keen to reduce its debt after its $84.5bn acquisition of Time Warner, is even planning to top the price of the most expensive streaming service out there, HBO Now – which charges $15 per month – for its upcoming three-tiered service.

Elsewhere, Hulu and AT&T are mulling the option of adding “pause ads” on its streaming services in 2019, which will see ads run on their platforms when users pause for a break.

Netflix content spend – now expected to be a fair bit over the originally planned $8bn for 2018 – has been a particular sticking point for its shareholders. News of the price hike has been well received, with shares going up by 6.5% by market cap on Tuesday.

Analysts have backed the Netflix pricing action. Piper Jaffray, SunTrust and RBC Capital Marks have all left positive notes on the streamers move. RBC’s Mark Mahaney said the firm foresees a $1bn boost to Netflix’s top line as a result of the move.

Netflix has been on the up across January after receiving upgrades from UBS and RayJay last week. Its shares have surged by more than 35% since markets opened this month, ahead of its Q4 financial results which are reported this Thursday (17 January).