The Price Increase Won't Affect Netflix, Inc. Stock ... Yet

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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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 26, 2014, at 8:21 PM, Fo45 wrote:

    Two factors were vital for Netflix Growth. The first was the price the second was the originals.

    People were dying to see shows like Sopranos but, $15 a month with prohibitive cable subs fees were discouraging and this where Netflix became more popular. But, now being able to see HBO shows for $8.99 /month in Amazon will slow down Netflix 's Growth significantly even without price change but for sure with Netflix price hike.

    there is nothing to look forward to for netflix future I would not Buy the stock and buy Put contracts. Furthermore, Hastings's arrogance put Netflix at war with big Guys in the entertainment world most of them ISPs holding Netflix's umbilical cord. So I will run,run away from the stock.

  • Report this Comment On April 28, 2014, at 9:05 AM, TMFMileHigh wrote:

    @Fo45,

    Thanks for writing.

    >>But, now being able to see HBO shows for $8.99 /month in Amazon will slow down Netflix 's Growth significantly even without price change but for sure with Netflix price hike.

    I think that's an unsustainable leap of logic. Netflix has enjoyed significant subscriber growth as a result of seeding new international territories while funding creative originals. The Amazon-HBO deal doesn't change that.

    FWIW and Foolish best,

    Tim

    --

    TMFMileHigh in CAPS and on the boards

    @milehighfool on Twitter

    http://about.me/timbeyers

    http://timbeyers.me

  • Report this Comment On May 12, 2014, at 7:46 PM, Hansen wrote:

    Netflix’s international streaming subscribers increased 113% over the year ending third quarter of fiscal year 2013, while its domestic subscriber base increased only 24% during the same period http://goo.gl/OBM74h

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