Video streaming service Netflix Inc (NASDAQ: NFLX) said it intends to raise the monthly subscription price for new customers by $1 or $2 U.S. a month to help the company buy more movies and TV shows and improve service for its 48 million global subscribers.
Investors welcomed the announcement by Netflix, which had suffered from a consumer exodus and stock plunge after it announced an unpopular price increase in July 2011. The company's shares jumped $29.08, or 8.4% in early Tuesday trading to $377.57 U.S., after the company released plans for a price hike and posted a rise in first-quarter profit that beat Wall Street expectations.
Chief Executive Reed Hastings said Netflix had improved its selection of TV shows and movies and added original series like critically acclaimed Kevin Spacey thriller "House of Cards."
With added revenue from higher prices, "we will be able to license much more content and deliver it in very high quality video," Hastings said on a webcast.
The company, in a quarterly letter to shareholders, said it plans to impose "a one or two dollar increase, depending on the country, later this quarter for new members only." It did not name the countries. Existing customers would keep their current price "for a generous time period," it said.
Netflix has "room to raise prices," FBN Securities analyst Shebly Seyrafi said, because "they're still seeing a lot of demand" for the service.
The company said in its earnings report it added 2.25 million customers to its U.S. streaming business during the quarter that ended in March, in line with the company's earlier guidance, for a total of 35.7 million. In international markets, its customer base reached 12.7 million, a gain of 1.8 million during the quarter.
Net income for the quarter reached $53 million U.S., an increase from $3 million U.S. a year earlier. Earnings-per-share came in at 86 cents, topping the average forecast of 83 cents U.S., according to analysts surveyed by Thomson Reuters I/B/E/S.
