The leader in online TV is getting a little more aggressive with its pricing.

Netflix Inc. is raising the cost of its most-popular U.S. subscription by US$1, to US$14 a month. That includes full high-definition viewing. The price of its 4K-resolution service increased by US$2, to US$18. The entry-level tier stays priced at US$9.

Netflix shares rose as much as 5.7 per cent to US$513.90 on the news. The stock is up 58 per cent this year.

The company didn’t immediately respond to a request for comment

.Embedded Image

In the past, Netflix price hikes have led to a slowdown in subscriber growth, particularly in the more-mature U.S. market. But on a conference call with investors last week, Chief Operating Officer Greg Peters said the company believed it had an opportunity to raise prices, given the large amount of original and popular shows it produces.

“We feel like there is that opportunity to occasionally go back and then ask members, where we’ve delivered that extra value in those countries, to pay a little bit more,” Peters said.

Raising prices in a difficult economic environment isn’t without risks, which Netflix nodded to by keeping its service for budget-conscious subscribers unchanged. Spotify Technology SA, the largest audio streaming service, slid Thursday after reporting subscription-service revenue that missed estimates. That company cited price increases in certain international markets.

What Bloomberg Intelligence Says

“Netflix’s decision to raise prices on its streaming plans for its U.S. subscribers speaks to the service’s strength of content and value proposition. With over 65 million domestic members and a US$1 increase in the price of its most popular plan to US$14 a month, the move will result in about $800 million or more of incremental revenue and will boost free cash flow.”
--Geetha Ranganathan, media analyst

The increase in Netflix’s most-popular tier brings its price closer to that of AT&T Inc.’s HBO Max, whose US$15 monthly fee is thought to have discouraged sign-ups by people who didn’t already have HBO.

Netflix last week reported a second-quarter global subscriber number that fell short of analysts’ expectations. Chairman Reed Hastings said he wasn’t concerned about the shortfall, since the global pandemic had prompted more subscribers to sign up early in the year and viewing trends remained strong.

The company last announced a U.S. price increase in January of last year, an increase at the time of US$2 a month for the most-popular plan.