Netflix Inc (O:NFLX) is raising monthly fees for its U.S. subscribers by between 13 percent and 18 percent, the video streaming pioneer’s first price increase since 2017 as it spends heavily on original content and international expansion.
Prices for its popular standard plan, which allows streaming on two devices at the same time, will be increased to $12.99 per month from $10.99, the company said in a statement.
Netflix shares rose 6 percent to $352.64 in morning trading, adding to their 30 percent rise so far this year.
The company’s top-tier plan, which allows streaming on four screens in high definition, will be raised to $15.99 from $13.99 per month, while fee for its basic plan will rise to $8.99 from $7.99.
In comparison, Time Warner Inc‘s HBO Now streaming service charges $14.99 per month, while Hulu’s no-advertisements plan is priced at $11.99/per month.
“It highlights that Netflix has pricing power and even after the increase it remains a very cheap entertainment alternative,” Pivotal Research Group analyst Jeff Wlodarczak said.
The price hikes will be applied to all existing members over the next few months and to all new members immediately.
“We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience for the benefit of our members,” the company said.
Netflix has been pouring money to bolster its original content to fend off intensifying competition from players such as Amazon.com’s (O:AMZN) Prime Video service and Hulu.
But that has led to an increase in Netflix’s long-term debt, which doubled to $6.50 billion in 2017 from $3.36 billion in 2016.
The company is expected to have a debt level of $8.33 billion in 2018, according to Daniel Morgan, senior portfolio manager at Synovus Trust Co, which owns 15,019 shares of Netflix.
Netflix is scheduled to report quarterly results on Thursday./investing.com