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Why Netflix Shares Jumped 7% Higher This Morning

By Anders Bylund - Updated Apr 18, 2019 at 10:37PM

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The streaming-video giant is raising subscription prices for American customers for the first time in two years.

What happened

Shares of Netflix ( NFLX -0.09% ) were trading 7.2% higher at 1 p.m. EST Tuesday, as the streaming-video veteran raised its subscription prices for American customers.

So what

According to a statement seen by Reuters and others, Netflix has raised its streaming subscription prices by a couple of dollars per month. The pricing changes will first apply only to new subscribers, later rolling out to existing customers over a three-month period. Increases range from 12.5% to 18%, putting the simplest and cheapest plan at $9 per month, while the high-end option with Ultra HD content and up to 4 concurrent streams per account will cost $16 per month. The new prices will also apply to international markets where subscribers pay their fees in U.S. dollars, including several countries in South America.

Red Netflix logo on a beige stucco wall outside the company's California headquarters

Image source: Netflix.

Now what

This is Netflix's first domestic price increase since 2017, though the company constantly adjusts its fee structures in various international markets without much fanfare. As a reminder, the price changes two years ago ranged from 10% to 17%, and the simplest plan held steady at $8 per month. Those pricing boosts didn't appear to slow down Netflix's subscriber growth, but most certainly improved its financial performance. The number of paid domestic subscribers increased by 11% in the third quarter, compared to the year-ago period. At the same time, revenues from that segment grew by 25% and operating profits jumped 38% higher.

Management is sure to add some color commentary to this move on Thursday, when Netflix reports its fourth-quarter results. Stay tuned.

Check out the latest Netflix earnings call transcript.

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