Netflix announces biggest subscription increase in 12 years

Netflix Shares are Soaring, But Here’s Why Customers Won’t be Happy

Netflix subscribers get ready for a price increase. According to a report from The Wall Street Journal, Netflix will increase the prices of all of its subscription plans, effective immediately, for all new customers.

The rate hike constitutes an increase between 13 and 18%, the biggest increase in the company's 12-year history and the fourth increase in USA prices.

Previously, Netflix had continued to offer a basic, $8-a-month streaming plan while raising rates on more comprehensive plans with better video quality and options to watch simultaneously on different devices.

The most affordable Netflix plan, which was priced at $8 a month, now costs $9 a month. A premium plan offering ultra-high definition will jump to $16 per month from $14. Existing subscribers will see the price increase in the next three months. "Our job is to focus on, invest in providing our members incredible experiences, more great content, and great product experiences", said Chief Product Officer Greg Peters.

T-Mobile CEO John Legere says that despite the Netflix price hike, T-Mo's Netflix On Us feature won't change "for now".

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Domestic pricing is seen as one way to protect the company's financials as it pours money into original content and expands into new world markets, where Netflix has less leeway to bump prices. Netflix has continued to invest in original programming over the past few years, going away from the licensed IP model it had towards the beginning. Disney brings with it live-action Star Wars and Marvel series and Apple has roped in its own A-list talent, but Netflix remains king when it comes to quantity, having shored up a tremendous amount of original content over the past couple of years.

Netflix smartly raises prices a little bit at a time, so $1 here or $2 there doesn't seem too significant. Shares of Netflix rose 6.2% to $353 Tuesday morning.

RBC Capital Markets said much of the increase will go to finance new content that draws subscribers in each month, while SunTrust argued that the content Netflix has on tap this year is strong. Netflix lost 600,000 subscribers after that switch.

One other important point to make in relation to Netflix: back in 2010, the video company, like Spotify, only had one paid tier.

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