By John Kell
Netflix Inc. said that by July, it plans to increase its U.S.
prices for new members by a dollar or two a month, after
subscribers generally shrugged off a price increase in Ireland.
Any such increase would be Netflix's first such overhaul in the
U.S. since the video-streaming company's well-publicized stumbles
three years ago.
The plan to charge new users more for Netflix's service comes as
the company has signed deals with major studios such as Walt Disney
Co. that has helped increase its long-term content commitments.
Netflix also has spent money developing and marketing its own
original contents, costs that can be met by adding more subscribers
or charging more.
Netflix's current pricing plan offers unlimited streaming movies
and television episodes for $7.99 a month. In addition, Netflix
offers a one DVD out-at-a-time plan, also for $7.99 a month.
"Existing members would stay at current pricing for a generous
time period," Netflix said. The company said the reaction to a
price increase in January for new members in Ireland was
"limited."
Some analysts have argued that Netflix can charge more for its
service to close a gap in how much its customers spend for content
compared with traditional competitors. Pacific Crest Securities
estimates that Netflix's cost to the average streaming customer is
about 16 cents per hour viewed, far below the cost of roughly 50
cents per hour viewed for traditional pay-TV packages.
Netflix mentioned the probable pricing changes-- which the
company hinted at earlier this year--along with its quarterly
report. In the first quarter, Netflix added 2.25 million U.S.
streaming subscribers, matching the company's projection.
Netflix frequently uses its earnings report to discuss the
larger issues affecting the company, and on Monday, the company
opted to comment on Comcast Corp.'s $45 billion offer to acquire
Time Warner Cable Inc., a proposed combination of the nation's two
largest cable companies.
"The combined company would possess even more anticompetitive
leverage to charge arbitrary interconnection tolls for access to
their customers, " Netflix wrote. "For this reason, Netflix opposes
this merger."
Netflix Chief Executive Reed Hastings last month called for
rules to ensure that big broadband providers like Comcast can't
keep charging companies such as Netflix a fee to connect directly
to their network-a practice known as paid interconnection, or
peering. While Netflix struck a paid peering deal with Comcast to
improve its service, the company warned such deals could open the
door for Internet service providers to charge Netflix more to reach
consumers.
Overall, for the first quarter, Netflix reported a profit of $53
million, or 86 cents a share, up from $3 million, or five cents a
share, a year ago. Revenue jumped 24% to $1.27 billion.
The company in January had projected a profit of 78 cents a
share. Analysts polled by Thomson Reuters most recently expected a
profit of 83 cents a share, with revenue expected to total $1.27
billion.
The last major pricing change by Netflix came in 2011, when it
tried to move away from offering a single plan for streaming and
DVD-by-mail by introducing two separate plans. The company reversed
course after a customer backlash and a major dent in its stock
price.
Shares of Netflix, which are frequently volatile following the
company's earnings report, rose more than 6% after hours.
Netflix has sought deals for more exclusive content as it deals
with competition from Amazon.com Inc. and other outlets. Exclusive
contract pacts have been signed with Disney and others, while
Netflix also has signed production deals with Disney's Marvel and
Sony Corp.'s TV studio to produce new original series.
The company also aims to court new customers with original
programming. The second season of "House of Cards," which made its
debut in February, generated "a huge audience that would make any
cable or broadcast network happy," Netflix said. It intends to
launch the second season of "Orange is the New Black," another
Netflix program, in June.
Looking ahead, Netflix projected a second-quarter profit of
$1.12 a share, above Wall Street's forecast of $1 a share. The
company expects to add 520,000 in net domestic streaming additions
in the current quarter, with the paid membership for that market
expected to total 35.03 million.
Internationally, Netflix added 1.75 million streaming members,
more than the company expected in January and bringing the total
paid membership to 11.76 million. Netflix expects to add 940,000
new streaming members abroad in the second quarter.
Write to John Kell at john.kell@wsj.com
Corrections & Amplifications
An earlier version of this story misstated the number of U.S.
streaming subscribers added.
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