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What Netflix Risks With Its Latest Price Hike

The Information | Jan. 14, 2022, 8 p.m.

Netflix is raising prices—again—to as much as $20 a month. Yes, while the video-streaming pioneer may have improved a lot on the cable television experience—no ads!—it’s copying one of cable’s worst habits: regular price hikes. Today’s increase is the third time in just the past three years that Netflix has raised prices in the U.S. The service’s top tier is now 42% more expensive than it was in late 2018.That’s inflation for you. Wall Street, at least, was happy. Netflix stock, which has dropped 25% in the past two months amid broader market jitters, rose 1.25% on the news. Is it really good for the stock? Sure, Netflix’s revenue will get a near-term lift. Assuming this move is limited to the U.S., it should increase revenue by more than $1 billion annually or 4%. What we don’t know, though, is how many subscribers will cancel. Indeed, the $20 price point is the upper end of what many people are willing to pay for Netflix, according to research done on its customers by ProfitWell, a software firm that works with subscription services. However, having two lower tiers, costing $10 and $15.50 each a month, will protect the company from losing too many, said ProfitWell CEO Patrick Campbell.

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