Netflix just raised its prices, and the stock market is reacting quite positively to the news.
Today Netflix announced that it will raise the cost of the streaming service across several plans, and the market is rising because of it. So far Netflix's stock has risen by 6% as of today after the company announced it would be making the changes immediately for new customers and over the course of 3 months for existing subscribers. So far it also has already gained 30% overall in 2019 (via CNBC). Not a bad way to start the year, right?
This has happened in the past as well whenever Netflix raises its prices. This will be the fourth time since the company launched 12 years ago. The most recent change occurred in October 2017, which rose the stock up by 3% that day and did not result in a loss of subscribers. In fact, last quarter Netflix said its subscriber pool has grown by 10.7% year over year, and it currently sits at 58 million subscribers in the U.S. and 78 million internationally.
As for the why this increase is most likely part of Netflix's long term plan to become self-reliant. Netflix has continued to invest in original programming over the past few years, going away from the licensed IP model it had towards the beginning. Those shows, as we saw with the Marvel TV fallout, are expensive to make and you don't get all the profit. With original IP you get all of the money and can tweak the format on the fly with whatever makes the show more profitable. You can't necessarily do that with licensed IP, and so far Netflix has done a fantastic job of creating new original content that fans want to see.
“We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience,” a Netflix spokeswoman said in a statement.1comments
Netflix also faces much more competition these days, and that will only continue to become more substantial in the coming years. Comcast, Warner Bros, and of course Disney are all launching their own streaming services in 2019 and beyond, so it becomes all the more important for Netflix to have content you can't get anywhere else. This new influx of cash should allow the streaming giant to invest in even more content to set it apart from the others.
You can check out all the details on the price changes right here.