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Netflix raises prices on U.S. subscriptions

Netflix will raise its U.S. standard and premium subscription prices as content spending continues to grow. Yahoo Finance’s On The Move panel weigh in.

Video Transcript

JULIE HYMAN: Netflix is another, it's down more than 4.5% right now. It looks like the company is going to be raising prices on its various plans. Dan Roberts, interesting timing here, and interesting what they're saying that this is because they want to be able to fund more programming, right?

DAN ROBERTS: Sure. And that's a good excuse. And I also think that you could write it off, but it's also half legitimate. Look, what was it, a week ago or two weeks ago when Netflix had earnings and everyone made a lot of hay with the fact that it missed a sub adds in the US. Although, the company then said, boy, if the quarter had just been defined as 40 hours longer, we would have made expectations.

But it only added 2.2 million US subscriptions, and everyone got upset. Although, it did beat on revenue. But everyone kind of overlooks that. And in that earnings call, the company did remind people, and it was a little bit of a sop to people who were concerned, that it just started re-filming a number of Netflix originals that have been paused during the pandemic.

And I do think that, you know, if you're bullish on Netflix, there's no reason to be concerned by a price hike. A year ago, the last time it did it, the stock went up. Now, of course, the stock initially went up yesterday when this news came out. Right now, Netflix down about 6%. Maybe that's because of the larger movement in tech stocks right now.

But I also want to mention that the entry level plan, which is the one-- the most basic they offer, where you only get one sign in, you know, one device at a time, is not going up. That remains at 8.99, which went up a year ago for the first time ever. The standard plan, which is what probably most of us have, is going up $1.00. The premium subscriptions here is going up $2.00.

The point here is, I don't think it's anything to freak out about. I think most Netflix people shrug and continue to pay. The question is, what is the limit? Where is the ceiling on these price hikes? For how much longer can Netflix continue to grow its revenue by raising prices whenever it chooses?

ADAM SHAPIRO: Dan--

DAN ROBERTS: And I think the originals really help with it.

ADAM SHAPIRO: So you've just raised the discussion that went on in this household last night. Because we have Netflix, and we're talking about cutting the cable because you can get YouTube TV, you can get Netflix, and then start doing a la carte. Which brings me to the question about the potential to sign up new customers.

People paid attention to that when they reported the earnings. But it doesn't seem to be as big a threat that that, I don't want to say it's peaked, but that that's maturing. As an investor, should I pay more attention to that, or should I start to dismiss it?

DAN ROBERTS: Well, so I'm glad you asked. I mean, really, the approaching saturation is happening in the US, and I often think that we focus too much myopically on Netflix in the US. Outside the US in certain markets, they're growing subscriptions like crazy, especially Europe and certain Asian markets.

Now, if you want to talk about when do you consider canceling, first of all, my theory, maybe it's just anecdotal, is that there's very few people who see a price hike in Netflix and they say, well, now I'm out, now I'm canceling. I think that Netflix's advantage has been, you know, you can talk about Hulu having a couple hit shows, talk about Apple TV+, talk about Disney, which has a lot of great Disney IP, Netflix is still the kitchen sink option.

You know, there are certain shows that become cultural conversations. "Tiger King," "Emily in Paris" right now. But in addition, there's just such a huge vast volume of stuff on there. You can almost never get through all of it. All the time someone's saying, did you see that "True Crime" documentary? Nope, I didn't even hear about it. Well, now there's another thing I got to watch.

And I think that remains the case, and that's why you heard Greg Peters justify this price increase by talking about, it's going to allow us to make more investment in originals. That's what gets people coming back.