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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 1.93%) 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.

Anders Bylund owns shares of Netflix. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.

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