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January 15, 2019

Netflix raising prices to keep up with original content production costs and its $12 billion debt

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Changes are underway for Netflix, which is raising its subscription prices for the fourth time in 12 years.

Ever since Netflix premiered "House of Cards" back in 2013, it's gotten increasingly more difficult to understand how the streaming service keeps pumping out pricey original content – some with legitimate movie stars – all while most people use a friend's account instead of shelling out $11 for a monthly subscription.

Well, it looks like this impossible math equation is finally catching up to the entertainment giant.


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Netflix announced Tuesday that its U.S. prices are on the rise, from 13 to 18 percent, marking the company's largest increase since it first launched in 2007. For the majority of subscribers, that means the monthly fee will jump from $11 to $13.

The Associated Press reports the new fees are to aid Netflix in investing more into its original content, as well as finance the hefty debt it has cultivated while rivaling the likes of Amazon and Disney. Netflix reportedly burned through $3 billion last year and expects to do the same in 2019. The company reportedly has $12 billion debt.

Though this is the fourth time Netflix has raised its prices in the last 12 years, the company said this is the first time the new price will apply to all 58 million subscribers in the U.S., regardless of their subscription plan.

Beyond the popular $13 plan, Netflix has other options that go will cost as little as $9 and as much as $16 after the new prices are implemented.

The new fees aren't starting immediately, however, except for new subscribers. Current subscribers will be charged the new fee throughout the next three months.

Netflix's new prices, nonetheless, are still on par with similar streaming services. Hulu, for example, is available without ads for $12 a month, while Amazon charges $13 a month (or includes it in a $120 annual Amazon Prime fee). HBO's streaming service runs at $15 a month.

According to Market Watch, the new price could help Netflix get an extra $1.39 billion annually -- that is, if nobody cancels in light of increase. 

Along with the new prices could come stricter guidelines on sharing accounts with others, potentially putting into question your ability to mooch off friends and family indefinitely.

A recently announced AI service from Synamedia would make it easier for services such as Netflix to track who is sharing their passwords but not paying for the upgraded account. The tech would track, for example, if two apparently unrelated households with different tastes or geographic locations are using the same account – and will nip it the bud.

Though Netflix has not committed to Synamedia or similar tech, a Yahoo! Finance analysis found that password sharing is costing Netflix at least $2.3 billion a year. Netflix currently allows no more than two devices to stream from the same Netflix account at a time.


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