The shrewd politics behind the Netflix price hike


(Netflix)

If you're on the fence about getting a Netflix subscription, you may want to act now. The company is hinting at a price hike that could hit sometime in the next couple months. 

In a letter to shareholders, company executives wrote that a one- or two-dollar monthly increase could soon be levied on new customers, with a rise in prices eventually hitting existing customers as well:

As expected, we saw limited impact from our January price increase for new members in Ireland (from €6.99 to €7.99), which included grandfathering all existing members at €6.99 for two years. In the U.S. we have greatly improved our content selection since we introduced our streaming plan in 2010 at $7.99 per month. Our current view is to do a one or two dollar increase, depending on the country, later this quarter for new members only. Existing members would stay at current pricing (e.g. $7.99 in the U.S.) for a generous time period. These changes will enable us to acquire more content and deliver an even better streaming experience.

The increase comes just weeks after Netflix signed a controversial deal agreeing to pay Comcast -- the nation's largest cable TV company and among the biggest providers of fast Internet connections -- an undisclosed amount of money in exchange for better streaming speeds. That led critics to wonder whether Netflix would pass on any new costs it may have incurred as a result of the agreement to consumers.

When asked whether the Comcast negotiations played a role in Netflix's decision to raise prices, Netflix spokesperson Joris Evers was vague, writing in an e-mail that "the main motivation is to provide more great things to watch, but content delivery costs are part of the costs we have to pay."

When asked in a follow-up inquiry whether those content deliver costs specifically included the Comcast deal, Evers replied: "I am saying that content delivery is part of our costs. I am not saying there is an increase or decrease in content delivery costs."

More likely is that Netflix has chosen to raise costs while people's memory of the Comcast deal is still fresh — opportunistically deflecting any ill-will over the hike toward the cable company, one analyst said.

"I expect the price increase is more driven by content costs than interconnection fees," said Paul Gallant, a telecom policy analyst at Guggenheim Partners. "But politically, it would certainly make sense for Netflix to explain its price increase partly by reference to its Comcast deal."

Consumer advocates are closely watching for any fallout from the Comcast deal, which they viewed as a step toward big distributors controlling what travels over the Internet, at what speed and at what price.

Brian Fung covers technology for The Washington Post.
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