Netflix Risks Subscriber Fallout After May Price Increase for Long-time Users

Millions of Netflix subscribers were tipped off last week to a $2 per month bump in standard streaming subscriptions on tap for next month, as stories swirled around media sites and social media about the hike to $9.99 per month. Subscribers didn’t get an official word from Netflix, and a few were miffed at the streaming video service for not sending notice directly, although the increase shouldn’t be a surprise. Netflix emailed subscribers in May 2014 (see 1405120065) alerting them they were grandfathered in at $7.99 but would face a price hike in two years. At the time, the new subscriber rate was $8.99 per month, which went up to $9.99 last October. Wedbush Securities anticipates some falloff due to the increase, analyst Michael Pachter emailed us. “Most subscribers use the service and perceive sufficient value to remain subscribers after the price increase.” Wedbush estimates 600,000-750,000 subscribers don't use the service “but still pay out of inertia.” It expects those subscribers to “gradually defect when the price goes up, particularly if the company notifies them of the increase.” Pachter said new subscribers have paid $9.99 since October, “and it appears to be dampening new subscriber growth already.” Business Insider reported that Netflix will raise prices on roughly 17 million of its standard accounts next month and said “most people have no idea.” It cited a JPMorgan survey saying 80 percent of Netflix subscribers grandfathered in at $7.99 didn’t know the increase was to go into effect in May. A Netflix spokeswoman told us Friday that grandfathered subscribers will have the choice of continuing at $7.99 on the standard-definition plan or continuing on HD at $9.99 per month. The two-year holding price was a "thank you" to members, she said. Later this month, members in the U.K. will begin to be "ungrandfathered," she said, and beginning in May, the price hike is rolling out elsewhere based on member billing periods. Members affected by the price increase "will be clearly notified by email and within the service, so that they have time to decide which plan/price point works best for them," she said.