How much is “House of Cards” worth to fans? Netflix CEO Reed Hastings is about to find out.
The company plans to raise streaming prices for the first time in nearly four years, with new members paying $1 or $2 more a month for the service, or as much as $10.
Netflix’s current plan includes all-you-can-watch movies and television shows for $7.99 a month. Existing customers will continue to pay the current prices for “a generous time period,” the company said.
Netflix used its first-quarter earnings release to announce the price increase.
It took Hastings nearly three years to work up the courage to try to pass through a price hike after a disastrous attempt in 2011.
That increase was too much, too fast for people who saw their monthly bill jump $6 in the middle of the downturn. Netflix lost 800,000 customers and saw its stock price plunge 80 percent after a PR nightmare ensued.
This time the company is taking it slower, with executives going out of their way to explain that the price hike will allow the company to do more original programming, like “House of Cards” and “Orange Is the New Black.”
“If we want to continue to expand to do more great programming, we have to eventually increase prices a little bit,” Hastings said.
The price hike coincides with a controversial “interconnection” deal in which Netflix agreed to pay Comcast for better Internet service delivery.
With consumers watching more online video, broadband service providers increasingly are looking to levy tolls for delivering Internet traffic.
Hastings likened the current state of play to the hefty fees broadcasters charge cable and satellite companies to carry their programming.
“We’re trying to avoid that by moving everyone to no-fee interconnects,” Hastings said.
In his letter to shareholders, he also opposed Comcast’s proposed deal to buy Time Warner Cable for $45 billion.
“The combined company would possess even more anti-competitive leverage to charge arbitrary interconnection tolls for access to their customers,” he said.
While he offered an olive branch to Comcast CEO Brian Roberts, describing him as “reasonable,” he said that no single company should control 60 percent of homes.
“It’s more in the public interest to not have them merge or at least put settlements in there,” he wrote.
Comcast responded with a statement that read in part, “Netflix’s opposition to our Time Warner Cable transaction is based on inaccurate claims and arguments. There has been no company that has had a stronger commitment to openness of the Internet than Comcast.”
Netflix’s profit increased in the first quarter, thanks to strong subscriber gains. The company added 2.25 million US subscribers, bringing its total to 35.7 million — bigger than any single pay-TV firm.
The company reported profit of $53.1 million, or 86 cents a share, up from last year’s first quarter, when it earned $2.7 million, or 5 cents. Revenue rose 24 percent, to $1.27 billion.
The company forecast a less stellar second quarter, estimating just 52,000 domestic streaming net adds versus 63,000 in the same period last year
Netflix shares rose 6.6 percent, to $23.01, after hours.