Netflix announced its biggest subscriber price hike in company history Tuesday morning.
Netflix (NFLX), which is currently up 6.80 percent for the day as of 1:00 p.m. EST, announced it would be increasing its monthly subscription price for all U.S. customers. This means its most popular watching option, which typically costs the customer $11, will go up to $13 per month. The price hike is estimated to be somewhere between 13 and 18 percent, considered the largest increase in the company’s nearly 13-year history. (RELATED: Is Netflix The Unofficial King Of Entertainment? Its Soaring Stock Price Seems To Suggest So)
Curiously, Netflix’s stock price surged at Tuesday’s opening bell, suggesting investors are not overly concerned about the price hike, and that it may indicate a healthy consumer loyalty and a promising indication of growth.
Netflix spikes at the market open, up more than 4%, after announcing it will raise prices in the U.S. https://t.co/Pv8lcvQQRY pic.twitter.com/qiTal7EsQ4
— CNBC (@CNBC) January 15, 2019
Netflix has been doing very little but rallying this year. After it took home five awards at the 2019 Golden Globes, its stock price surged over six percent and has been enjoying relatively stratospheric highs since. Its contemporaries in the FAANG group (Facebook, Amazon, Apple, Netflix, Google) have been enjoying similarly strong numbers despite a recent pre-Christmas selloff and tense trade talks with China.
Netflix claims its price hike can be attributed to two reasons: funding new and original content and financing its long-term debt. The company, which has an approximate market cap of $154.87 billion, has an estimated $8 billion debt, Verge’s tech reporter Julia Alexander points out. She also notes that Netflix shelled out $100 million alone for the rights to stream the hit 90s sitcom “Friends.” A lot of money for a decades-old cult comedy.
And while competitors like Hulu and Amazon feature intermittent ads during their programs, Netflix’s faithfulness to a content-only experience will likely not waver. This means a price hike was inevitable.
Although the market does not seem to mind much, and U.S. consumers likely won’t either.
What’s an extra $2 for another season of “Stranger Things”?
