LOS GATOS, Calif. (AP) -- As Netflix Inc.'s Internet video service keeps growing, some analysts keep wondering why the company doesn't consider a slight increase to its current streaming price of $7.99 per month in the U.S.
Netflix CEO Reed Hastings has made it clear he is determined to hold the line on prices, reasoning that it is the quickest way for the service to realize his goal of having 60 million to 90 million subscribers. A price increase also would risk enraging customers who still remember a change in service in July 2011 that raised rates by as much as 60 percent for customers who wanted dual access to the company's Internet streaming and DVD-by-mail plan. The company, which is based in Los Gatos, Calif., ended March with 29.2 million streaming subscribers in the U.S.
Hastings shared some of his thoughts on pricing strategy in response to a question posed during a Monday conference call held to review the company's first quarter earnings.
QUESTION: If you look at other premium networks they tend to peak out at about 30 million subscribers. If you get to that point where your net (subscription additions) start to slow down, would you put in place price increases, especially since HBO retails for $15 and you only charge $8?
ANSWER: Well, first, we started with streaming at $7.99 three years ago when we introduced the streaming plan. We've kept the same price for the last three years. We're very happy with that price. We've improved the content, significantly improved the devices and we've kept the same price, $7.99. And that's provided a lot of growth. So, I don't see any changes in the near-term coming in that.
Second, in terms of the total available market, we've generally described it as best we can as two to three times that of HBO linear (a reference to the subscribers who buy the service through cable operators). HBO linear is at about 30 million (subscribers), and our best guess is that the market for a service like Netflix because it's less expensive than HBO, it's got more content, it's all on demand, it's personalized, it's on multiple devices, is somewhere in the two to three times HBO or 60 to 90 million (subscribers). And we'll only know that within any confidence when we get there.