As Netflix raises prices for its streaming service, consumers are wondering if and when they will feel the hit. New members will see rates increase from $7.99 to $8.99. The only silver lining is that existing members will have their current rates locked in for two years (presumably until 5/9/2016). While a smart move for Netflix, this is a reflection that the company has learned from past mistakes. In September of 2011, Netflix announced it would split off its DVD-by-Mail service into a new company called Quickster. This was, mind you, right after the company announced a price hike. In the “what not to do” department, Netflix had just about made every rookie mistake in the book.
The result was that it lost 1 million subscribers in a single quarter, and shares plunged roughly 2/3rds in the same period. The experiment lasted roughly three months, with Netflix Chief Executive falling on the sword and humbling reversing the split. Similar to New Coke (remember that?) the pricing structures did remain separated, amounting to a 60% price hike for some users of both services.
Netflix Raises Prices in an Email
Check out the recent email announcing the price hike below:
If you’re an existing subscriber it looks like you have some time before the price hikes come your way. As Netflix raises prices for new consumers, expect services to continue to improve as the company continues to add new content and features. The delay on raising prices on existing subscribers seems to indicate that Netflix is at least beginning to understand the need for caution when effecting change in its programs.
For more information visit Netflix here.
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