Why Netflix will probably keep hiking prices
Netflix announced the biggest price hike in its history Tuesday with subscriptions going up by 13 to 18 percent, meaning the most popular plan cost will now cost about $156 per year.
New Netflix users are already being charged the higher prices but existing customers will see them phased in over the next few months. But as CBS News contributor and Wired editor-in-chief Nick Thompson reports, subscription services like Netflix don't seem to have trouble keeping customers, even after price hikes, which means they could keep coming.
The streaming giant has made big bets on lots of original programming to set itself apart from its competitors. The company's stock price soared almost $22 – to nearly $355 per share – reflecting Wall Street's belief the higher rates won't upset consumers.
From TV shows like "Stranger Things" and "Orange is the New Black" to movies like "Bird Box," Netflix has been churning out hit after hit after hit. While all that original content draws in new subscribers, they also cost a lot of money to produce.
Its most expensive monthly plan now costs $16, compared to $12 for Hulu, $9 for Amazon Prime Video and $10 for CBS All Access, offered by the parent company of CBS News.
"This is the fourth price hike over the last five years and people keep paying," said financial analyst Rick Munarriz.
Netflix is the world's largest premium video service, with nearly 150 million subscribers. Its membership almost tripled since 2014 even though the price of its standard plan has gone up nearly 63 percent.
"It's a monthly plan, it is something that you sort of just set it and forget it like many other monthly subscription services. It's almost an afterthought when you're scouring your credit card bill and that $12.99 a month comes around. You're usually fine with it," Munarriz said.
Munarriz believes most customers will continue paying for Netflix so long as the company keeps delivering hits.
"There will come a point where people will say – 'no mas!' but until they get to that point, you're going to see Netflix nickel and dime about every year or so and adjust their prices higher," Munarriz said.
In a statement, a Netflix spokesman said, "we change pricing from time to time as we continue investing in great entertainment."
Netflix subscribers will get 30 days' notice via email before they start getting higher monthly bills.