Netflix hikes up its prices every few years, which might have you wondering: Is a Netflix price increase coming? Is this because of the popularity of Stranger Things?
Each time the price goes up, people threaten to leave the service. Yet Netflix remains one of the most popular — and affordable — streaming services available. The price keeps rising, but Netflix now boasts more than 125 million users around the world.
The service has carefully balanced its price increases with the need to retain customers and attract new ones. What drives its decision to raise prices when it does, and how can you tell if a Netflix price increase is on its way?
In this guide, we’ll help you understand how to predict these price hikes. Keep reading so you can decide if you should keep your subscription!
Netflix Price Increase History
Would it shock you to learn that Netflix has existed since 1998?
Way back when Netflix started out as a service for renting DVDs by mail. Oh, how the times have changed.
Now, it’s hard to imagine a world when your favorite shows aren’t available at your fingertips 24/7. However, the cost of that luxury continues to go up. Let’s take a look at Netflix price increases throughout the years.
In the early days, people paid to rent DVDs through Netflix. In fact, Netflix didn’t even start to offer streaming services until spring 2007.
This first streaming option was actually a free add-on for DVD rental subscribers. However, you could only use an hour of streaming for every dollar you paid in your subscription plan. So if you paid $16.99 a month for DVD rentals, you’d get nearly 17 hours of streaming.
Needless to say, that quickly stopped keeping subscribers satisfied. Netflix soon had to make some changes.
The next major update came just a year after Netflix introduced streaming services when the brand decided to stop restricting streaming hours for customers. Instead, people could now use unlimited streaming if they had a DVD rental subscription.
However, there was one exception: People with the inexpensive $4.99/month plan could rent two DVDs each month and stream for just two hours.
Competitors like Apple and Hulu also offered DVD rental services at the time, so streaming had not yet become the dominant force that it is today. Netflix also added Blu-Ray DVD rental options in 2008 for users willing to pay a little more.
In 2011, Netflix made the bold move of splitting its offering into two packages. People could choose either a DVD rental package or a streaming package.
DVD rental prices stayed at $7.99 for a monthly subscription, while unlimited streaming was offered for $7.99 a month as well. Holders of the DVD package could also upgrade to more expensive plans, costing up to $19.99 a month. Netflix offered a free trial to get started, just as it does today, and the DVD rental package included unlimited exchanges.
However, this change didn’t exactly go over well with customers. People had gotten used to getting streaming and DVDs in one package. Now, if they wanted both, they had to pay for two separate packages. When Netflix announced this decision, its stock prices took a plunge, and hundreds of thousands of subscribers left the service.
For a less-nimble company, this could have spelled the beginning of the end. However, Netflix quickly realized its mistake and reversed the decision to split the two services up.
The Netflix price increase in May 2014 raised the cost for its streaming plan to $9.99 a month. However, this price only applied to new customers — old customers were grandfathered in at the old price.
In 2016, Netflix made all customers with the standard plan pay the new $9.99 price, including customers who had been paying less for years.
Although some people complained about the increases, Netflix wisely kept its price raises low, so many people decided that the increase wasn’t enough to make them leave the service altogether.
Netflix Changes Over the Years
When Netflix first arrived, it was a fun convenience that a few people enjoyed. Now, Netflix gets treated like a basic utility in many households. Let’s take a look at how the company’s popularity has grown through the years, in spite of price increases.
The first iteration of Netflix existed to provide an alternative to Blockbuster video rentals. Today, there’s just one Blockbuster left in the country. Meanwhile, entrepreneurs and start-up founders look to Netflix as an innovative business role model.
As the story goes, Netflix co-founder Reed Hastings once got a $40 fine from Blockbuster for a lost DVD. He became inspired to develop an affordable, convenient alternative for DVD rentals without late fees, and the rest is history.
His company went on to win Emmys for its original content, becoming a superpower in the entertainment industry. Netflix’s share prices have grown exponentially since the company went public, making investors lament not buying Netflix stock earlier. The company even outpaces cable television regarding numbers of U.S. subscribers.
Netflix also has a good reputation among employees. It’s known for offering generous benefits, including paid parental leave, making it one of the top tech employers in Silicon Valley as well as one of the biggest.
Here’s a closer look at the changes Netflix made through the years.
Co-founders Marc Randolph and Reed Hastings incorporate a Scotts Valley video business called Kibble. Later, they rename the brand Netflix. After just eight months, the company starts sending DVDs to subscribers via mail. Netflix services begin with just 30 employees and less than 1,000 DVDs.
Netflix announces a monthly subscription service rather than a single-DVD rental. The business grows using a model of unlimited rentals and no late fees or due dates for subscribers. It even offers free shipping.
Netflix offers its competitor Blockbuster the chance to buy it for $50 million. Blockbuster, still the major player in the video rental industry, declines the deal. Little did they know that Netflix would soon measure its value in billions.
The company holds its IPO, with shares selling for $15. Five and a half million shares get snapped up by investors. Netflix already has hundreds of thousands of monthly subscribers. March Randolph steps down as CEO and Reed Hastings takes over.
Netflix posts its first profit this year, under CEO Hastings. The $272 million in revenues results in a $6.5 million profit.
Marc Randolph retires from the Netflix board of directors.
Netflix offers developers the chance to build an algorithm for video recommendations that are better than their own, with a million-dollar prize for success. The prize doesn’t get awarded until 2009 when a team develops an algorithm that’s more than 10 percent better than Netflix’s.
The brand has mailed out more than a billion DVDs by this point. However, it has new plans to stay relevant and starts working on the streaming service.
Netflix springs for a pricey five-year deal so it can stream films from major players including MGM, Lionsgate, and Paramount.
Netflix makes the mistake of announcing that it will split its services into two subscriptions. Eight hundred thousand people cancel their subscriptions, and the company changes its mind in just three months.
In the same year, Netflix becomes the first streaming service to get nominated for an Emmy. House of Cards wins an award for its pilot episode.
Variety reports that Netflix is responsible for over a third of the data consumed in North America at peak hours.
The company announces unlimited paid paternity and maternity leave for its staff members, setting a trend that other major tech companies soon follow.
Netflix streaming is officially available almost everywhere in the world, except Syria, North Korea, mainland China, and the Crimea territory.
The brand releases over 600 hours of original programming this year. Many programs are successful, but a few flops make it into the mix, too.
Netflix buys rights to select feature films from the Sundance film festival, proving it can compete with the biggest film studios for movie rights.
Netflix streaming outpaces cable regarding popularity, with over 50 million subscribers.
Is a Netflix Price Increase on the Horizon?
Will Netflix use its popularity to raise prices once again?
The most recent Netflix price increase, in late 2017, didn’t affect all subscribers. Netflix raised the cost of its “standard” and “premium” plans by a dollar or two, but not the basic plans, just like it did in 2015. However, the basic plan doesn’t offer HD streaming, so the standard plan is more popular.
These increases help Netflix grow its profit margins so it can continue to invest in original programming. The successful original programming sets Netflix apart from its competitors, but it doesn’t come cheap. With the price increases, competitors like Hulu and Amazon have become less expensive than Netflix. You may check Netflix Competitors: Who Are They and Can They Actually Compete With Netflix?
Netflix works to justify its price hikes by offering benefits such as content that’s downloadable on phones for offline viewing. As the company continues to spend more on original programming, a future Netflix price increase is almost a sure thing. Researchers suggest that Netf fix prices could increase by as much as four or five percent a year for the foreseeable future. But it will be up to subscribers to decide whether or not the growing price is worth it.
What kind of Netflix price increase is okay with you? Leave a comment and let us know!