Netflix has raised its price to £7.49 a month for new UK customers.
The announcement marks the second time that Netflix has bumped up its monthly rates, as the VOD service continues to expand across Europe.
The company has already announced plans to launch in Japan, Portugal and Spain later this year. Such expansion, though, costs Netflix a lot of cash, as it has to invest in both marketing to attract customers in the new territories and content licences to provide things for them to stream.
Indeed, recent reports speculated that Netflix might start introducing pre-roll adverts to help balance the books, but the company has always ruled out that option, instead opting to increase charges to members to fund its ever-rising expenses.
In May 2014, that meant prices were hiked from £5.99 a month to £6.99 a month for new sign-ups. Existing customers, though, were promised that their rate would be frozen until May 2016. Now, the rate for new customers has risen further to £7.49 a month, with existing customers still having their rates frozen until May 2016.
The £7.49 a month tariff allows users to stream TV shows and movies on up to two screens at once in HD. There is a cheaper package available at £5.99 a month, although this only allows streaming on one screen in SD. For up to four screens, a Netflix subscription costs £8.99 a month and also includes Ultra HD video quality. Both of these other subscription options will remain the same price for now, as the middle tariff proves the most popular.
The last time Netflix raised its prices, growth slowed down among new members, with 3 million members signing up during Q3 2014 – down from the 3.7 million expected. At the time, though, Netflix emphasised the future profitability of the company, noting that the previous markets it had entered – Canada, in 2010, and Netherlands, in 2011 – were now “collectively profitable on a contribution basis”.
2014 was anticipated to see a net loss, due to ongoing expansion plans, but the first quarter of 2015 marked a positive step for the company’s finances.
“Our strong performance led to overall operating income that exceeded our projections ($97m actual versus $79m forecast),” announced Netflix, saying that it will “continue to invest aggressively” in original content, which it admitted is “cash intensive”.
“Our plan is to run around break-even globally through 2016, and to then deliver material global profits in 2017 and beyond,” said CEO Reed Hastings in a letter to shareholders.
“In order to continue adding more TV programmes and films, including great Netflix series such as House of Cards and Better Call Saul, we are increasing our price for new members,” Netflix told customers in an email.
The move follows a similar price rise for rival VOD service, NOW TV, which recently increased its rates from £5.99 a month for Sky TV shows to £6.99 a month, and from £8.99 a month for Sky Movies to £9.99 a month. Amazon has held the price for Prime Instant Video at £5.99 a month, or £79 a year (the equivalent of £6.58 a month) for a full Amazon Prime membership, including free next-day UK delivery.
“Price is guaranteed so long as you remain a member,” added Netflix.