For once, Wall Street has it right. A price increase on new subscribers is bound to be good for owners of Netflix (NASDAQ: NFLX ) stock. Fool contributor Tim Beyers explains why in the following video.
First, let's review what we know. Netflix plans a $1 to $2 price increase, varied by country, sometime later this quarter. Existing subscribers will be "grandfathered" in at the existing price for a "generous" period of time -- likely in line with the two-year grace period already in effect in Ireland.
Revenue won't jump in the near term as a result of this change. Rather, it'll be a slow, staged progression that allows Netflix to preserve its installed base while continuing to pursue rapid subscriber growth overseas. (The company has added more than 5 million foreign members over the past 12 months, a 78% increase year over year.)
The move comes on the heels of announced commitments to new original programming -- notably, the comedy Grace and Frankie, starring Lily Tomlin and Jane Fonda -- and follows Amazon.com's previously announced price increase on all Prime members.
Most important, Tim says the hike allows Netflix to grow profits without introducing gimmicks that would attract the ire of partners, such as special rental deals or premium one-offs. Instead, the business will stay true to what it's always promised customers: a simple mix of popular, obscure, and exclusive content for a reasonable monthly fee, increasingly delivered via the Internet.
Now it's your turn to weigh in. What's your view of Netflix's price hike? Will you continue to subscribe? If not, why not? Please watch the video to get the full story, and then leave a comment to let us know your take, including whether you would buy, sell, or short Netflix stock at current prices.
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