Netflix this week announced that subscribers will soon have to shell out a few more bucks per month if they want to enjoy the company’s impressively large and diverse library of content. Starting in November, the base level subscription plan will increase from $9.99 to $10.99 while a premium plan with support for 4K streaming will jump from $11.99 per month to $13.99 per month. While news of a Netflix price hike usually results in some degree of backlash and threats of users cancelling their subscription, the most recent price change from the streaming giant hasn’t exactly created a stir.
If anything, investors responded favorably to the news. Shares of Netflix are now trading at $196 per share, an all-time high for the company. This week alone, Netflix shares have climbed more than 10%. So what exactly is going on here? Well, according to UBS analyst Doug Mitchelson, Netflix will enjoy the increased revenue from pricier subscription plans without seeing a significant drop-off in cumulative subscribers. The reason? Netflix strategically timed its price increase announcement to coincide with the impending release of some hit shows.
“This timing coincides with what we expect will be a strong fourth quarter of 2017 content slate, which could help minimize churn,” Mitchelson said in a note obtained by Business Insider. Indeed, Netflix in a few weeks is not only releasing the highly anticipated second season of Stranger Things, it’s also releasing 29 new original programs over the next 3-4 weeks alone.
In the fourth quarter of 2017, Netflix has set up some potential hits. The company is releasing the second season of “Stranger Things”, its Will Smith-led original movie “Bright,” the first season of “Marvel’s The Punisher” and a revival of Emmy winning “Queer Eye,” to name a few.
Truthfully, I’m not sure Netflix would have incurred any backlash no matter when it announced the price increase. Netflix continues to pump out new content at breakneck speed, and it’s practically impossible for anyone to keep up with the deluge of new content hitting our screens week after week. Case in point: Netflix next year is planning to spend a whopping $7 billion on content. In short, even with the price increase, the value proposition offered by Netflix — with its varied selection of original and purchased content — is unrivaled in the media space.