VOL. 129 | NO. 1 | Wednesday, January 01, 2014
Netflix Tests New Price Tiers for Video Service
Netflix is testing new price plans for streaming video as it tries to lure more viewers.
Among the plans being tested are a $6.99-a-month plan that allows only one video stream to be watched at once, and a $9.99-a-month plan that allows three streams at one time, whether on a TV, tablet or computer.
A Netflix spokesman says not everyone will see the test prices and they may never roll out to all customers.
Netflix's standard $7.99-a-month plan allows users to watch video on up to 2 screens at once, including TVs and mobile devices. An $11.99-a-month service allows up to four shows at once. Netflix announced that plan in April.
Any move to offer a cheaper service tier would be surprising to some analysts, who expect the company to raise prices eventually to pay for the service's content.
The lower-priced tier could attract more value-conscious consumers, Sterne Agee analyst Arvind Bhatia wrote in a note to investors. But it also could prompt existing customers to trade down, if they cancel and sign back up for the cheaper service.
At the same time, though, Netflix has had to deal with increased competition for its customers. Amazon's Prime shipping service comes with a video-on-demand service similar to Netflix's. Redbox, which mostly rents DVDs through kiosks, has also rolled out a streaming video service.
Netflix subscribers have shown they can be fickle about price changes. The company's stock plummeted by more than 80 percent from highs reached in 2011 after the company imposed pricing changes that triggered a customer backlash.
Netflix's stock has since made up all those declines and set a new all-time high just above $389 in October. On Tuesday, its shares fell 21 cents to $366.78 in morning trading.
Introducing original content, such as the shows "House of Cards" and "Orange is the New Black," helped Netflix gain new customers this year. Netflix added 1.3 million U.S. subscribers in the third quarter and ended September with 31.1 million.
The Los Gatos, Calif.-based company also still offers a DVD-by-mail subscription plan starting at $7.99 a month, though it is moving away from that business in favor of delivering video over the Internet.
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