In its letter to shareholders announcing record revenue for Q1 2014, Netflix said a price increase trial in Ireland from €6.99 (US$9.64) to €7.99 a month had resulted in “little impact” to subscriber numbers, and therefore an increase was now forthcoming for subs in all territories, with the amount varying in each country it operates in.
Existing subs would keep their lower rates for a “generous time period”.
Netflix said this would all help the firm to acquire more content and improve its streaming experience. The company recently entered into a multi-year agreement with Comcast to allow for smoother and faster we speeds, a move come critics fear could spell the beginning of the end of so-called net neutrality principles, which dictate internet service providers should not knowingly control connection speeds.
Though Netflix hailed that deal at the time, the firm is opposing Comcast’s proposed merger with Time Warner Cable. “The combined company would possess even more anticompetitive leverage to charge arbitrary interconnection tolls for access to their customers,” Netflix wrote in the shareholders’ letter.
“Over the last couple of years, we have been improving the content selection on Netflix and broadening it, most recently with the addition of the amazing shows like House of Cards and Orange Is the New Black, and if we want to continue to expand to do more great original content, more series, more movies, we have to eventually increase prices a little bit,” said CEO Reed Hastings in a conference call following the results.
`”We are not doing much. We are doing $1 or $2, depending on the country and all the existing subscribers keep their current price. They don’t get it increased.”
Hastings said Netflix could introduce tiering options in the future, moving away from the current flat-fee subscription model. He pointed out that Netflix already ‘tiers’ its offer by providing the option of taking four concurrent streams for US$11.99 as opposed to two for US$7.99.
The news all came as Netflix posted first quarter revenue of US$1.07 billion, up from US$781 billion a year earlier. US$267 million of that came from its growing international business.
Overall operating income was US$98 million, up from US$32 million in the same period in 2013. International losses significantly lowered, and were at US$35 million, compared with US$77 million a year ago.
Netflix added 1.75 million international subs for the quarter to bring the total number to 12.68 million, thought the firm warned the pace of growth was likely to drop off in Q2 2014. Domestically in the US, Netflix is currently at 35.67 million subs.