Well, that wasn’t so bad. After weeks of speculation Netflix has announced it’s price increase will only amount to an extra $1. But most importantly, current subscibers are not affected with the increase for another two years. New subscribers will pay $8.99 instead of $7.99 from the outset.
Netflix made its price increase official Friday morning, announcing that new members will have to pay $8.99 per month going forward. The company also introduced a new SD streaming plan that will give users access to the entire catalog, but only in standard definition and only on one screen at a time, for $7.99 per month.
Existing members will continue to pay $7.99 for two years, after which the company will adjust its monthly fees as well. Netflix’s family plan, which offers HD access for up to four screens at a time, remains unchanged and will continue to cost $11.99 per month, according to a Netflix spokesperson.
The price increase doesn’t come as a surprise: Netflix executives have been talking about introducing more differentiated pricing for some time, and the company announced that it would raise prices for new members in conjunction with its most recent earnings release.
This is the first time Netflix is significantly changing its pricing ever since it split its DVD business and its streaming offering in 2011. That change, which effectively doubled the costs for members that wanted both streaming and physical discs, led to a huge uproar and mass cancellations. Netflix’s stock price tanked, and it took the company two years to recover from the move.
It’s unlikely that this more modest price increase will cause anything similar, in part because existing members are grandfathered into their plans. But the logic behind the price increase is also that it will give Netflix more money for licensing and producing content. If the company could provide a perception of becoming more valuable within before the price increase for existing members kicks in two years from now, then it might be able to avoid mass defections altogether.