Netflix announces price increases for two of its plans

Challenges why 2021 could be difficult for Netflix 1:11

New York (CNN Business) -

Netflix prices are going up.

The streaming media company raised the prices of its standard and premium plans for US customers.

His standard plan now costs $ 14 a month, $ 1 a month more than last year.

The premium subscription will increase by US $ 2 to reach US $ 18 a month.

Your basic plan remains unchanged at $ 9 a month.

Netflix shares rise after price hike

Netflix shares rose 5% on the news.

The new prices will go into effect immediately for new members, while current members will be notified that their subscription will increase as it rolls out in the coming months.

"We understand that people have more entertainment options than ever and we are committed to providing an even better experience for our members," a Netflix spokesperson said in a statement.

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"We are updating our prices to continue offering more variety of TV shows and movies."

The spokesperson added that Netflix offers "a variety of plans so that people can choose the price that best suits their budget."

Netflix's price hike, which was first reported by The Verge, is not a huge surprise.

Netflix spends billions on content and this is one way to increase revenue, as "the prospects for subscriber growth are substantially slower in the future than in the past," according to Bernie McTernan, senior analyst at Rosenblatt Securities.

"The price increase was a question not of if it would happen but of when," McTernan told CNN Business.

"It shows that they think people will be willing to pay more for the service as the pandemic disrupts content production, making their vast library more valuable."

Slow growth

The news comes in a week when the company posted slow growth in new subscriptions and lower-than-expected earnings.

This came after Netflix had a great year 2020 as people were stuck at home during the coronavirus pandemic.

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Netflix was asked about the price hike during its earnings call last week.

"The core model that we have, and what we really believe is our responsibility and our job, is to take the money that our members give us each month and invest it in the most judicious and intelligent way we can," Greg Peters said on the call , Netflix's chief operating officer.

"If we get it right… and improve that efficiency and effectiveness, we will deliver more value to our members, and occasionally we will come back and ask those members to pay a little more to keep that virtuous cycle of investment and value creation going."

Netflix is ​​the king of live broadcasts and the moves it makes, especially in terms of cost to the consumer, has an impact on the entire market.

For example, McTernan noted that Disney shares had a positive reaction after the announcement of Netflix's price hike.

"This will give Disney + an alibi to raise prices at some point," he said.

Clare Duffy of CNN Business contributed to this story.

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