Netflix to introduce three-tier pricing structure for new subscribers

23 Jan 2014

Online TV programme provider Netflix will be looking to introduce a three-tier pricing structure for new subscribers in the future but has promised current subscribers they will maintain their rate.

Netflix announced its intentions in a letter addressed to its shareholders detailing the future of the service and how it has fared so far.

According to the statement from CEO Reed Hastings and CFO David Wells, the company will be providing different-priced subscriptions which will have varying content and stream definition: “Last April, we introduced a 4-concurrent stream US$11.99 option to begin our evaluation of plan tiering.

“Since late last year, we have also been testing 1-stream and 3-stream variants, as well as SD/HD variations, at various price points. Eventually, we hope to be able to offer new members a selection of three simple options to fit everyone’s taste.”

However, they promised current customers they won’t be expected to pay more for a service they already receive, at least not for a considerable amount of time: “If we do make pricing changes for new members, existing members would get generous grandfathering of their existing plans and prices, so there would be no material near-term revenue increase from moving to this potential broader set of options. We are in no rush to implement such new member plans and are still researching the best way to proceed.”

Continuing growth

Netflix reported financial results showing significant growth last year, of millions of new subscribers domestically and internationally.

In Q4 in the US, the service had 2.33m new subscribers with an additional 1.74m new subscribers internationally.

Ireland received particular attention for its €1 increase for new members from 10 January this month and two-year grandfathering agreement with existing customers. The company states it is unsure of how this will affect growth in Q1 this year.

The issue of net neutrality was discussed after the US courts agreed with broadband providers that it was illegal. Companies like Netflix would potentially suffer as the decision would allow providers to charge extra for high-bandwidth websites which could subsequently be passed on to the consumer.

The company expects that “ISPs will avoid this consumer-unfriendly path of discrimination”, meaning no additional cost to subscribers.

Colm Gorey was a senior journalist with Silicon Republic