Netflix announced its financial results for the first quarter of 2014 on Monday, adding 4 million new streaming subscribers to bring its total subscriber base to more than 48 million. That’s still significantly less than HBO’s 130 million subscribers, but Netflix’s streaming revenue topped $1 billion – that’s a major milestone, since no individual quarter in 2013 cracked the billion-dollar revenue mark.
But to keep those revenue numbers up and help Netflix compete for content licenses and pay for original programming, US customers are going to be on the receiving end of a price hike.
According to its letter to shareholders, Netflix is planning to raise the subscription price for new customers in the US “Our current view is to do a $1 or $2 increase, depending on the country, later this quarter for new members only. Existing members would stay at current pricing in the US for a generous time period.”
In January, Netflix tested a similar price increase for Ireland’s estimated 175,000 subscribers from €6.99 to €7.99 but ‘grandfathered’ existing customers so they won’t get the increase for two years.
Amazon recently increased the price of a Prime subscription (which includes access to the Prime Instant Video service, very similar to Netflix) from $79 to $99 a year, which works out to $8.25 a month. A Prime subscription includes other perks, like free two-day shipping on a huge number of Amazon products, and a lending library for Kindle, so Netflix will really have to lean on the quality of its original shows to differentiate itself from that competition, should the monthly fee rise to $8.99 or more.
Still, Netflix CEO Reed Hastings doesn’t see Amazon Prime-versus-Netflix as a zero-sum game. On the first-quarter earnings call live-streamed on YouTube, Hastings said he’s a Prime member himself, because he sees Amazon’s service as complementary. “We’re building this ecosystem together that’s about Internet video,” he explained. “The big theme is Internet video taking share away from linear video, and so we’re all participating in that transformation.” Netflix is working with Amazon to add its catalog to the Fire TV’s voice search; Hastings said it should be out sometime this year.
Originals
Netflix does have a lot of confidence in its original shows, including Season 2 of House of Cards, which was cited as a growth factor in the first quarter. Documentary film Mitt also debuted on Netflix during the quarter, within a week of its world premiere at the Sundance Film Festival. Netflix even nabbed its first Oscar nomination for original documentary The Square.
Season 2 premiere dates are confirmed for Ricky Gervais’s series Derek (30 May) and Orange Is the New Black (6 June).
Internationally, Netflix is seeing strong growth, driven in part by its ability to show first-run American TV series. By releasing a new episode every week, international customers don’t have to wait for a season to be over before they can watch the whole thing. Netflix can get episodes to those audiences within anywhere from 24 hours to seven days of their airing in the US – international markets saw the last season of AMC’s Breaking Bad on Netflix within days of each episode’s US airing, and new series premiering that way include spinoff Better Call Saul, as well as From Dusk Till Dawn and FX’s new Fargo series.
TechHive
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