Netflix Price Increase Could Lead to Cancellations

Netflix has a massive user base of customers that stream all of their movies and TV shows, but they could be losing a significant amount of customers in the near future.

The streaming service announced that it would increase it’s monthly subscription fee from $7.99 to $9.99 back in May. However, those who had been members of Netflix before May of 2014 wouldn’t experience the price increase until October of this year.

“We will phase out this grandfathering gradually over the remainder of 2016, with our longest-tenured members getting the longest benefit,” Netflix CEO Reed Hastings said back in April. “We are rolling this out slowly over the year, rather than mostly in May, so we can learn as we go.”

Apparently, that price increase in October could lead to the loss of a lot of subscribers.

According to Brandon Katz from Forbes.com, a study done by Anthony DiClemente from Nomura Securities projected that the price increase could lead to approximately 480,000 customers canceling their Netflix memberships. At approximately $10 a month, that would lead to an estimated $57.6 million in lost potential annual revenue.

While that might seem like a lot of money, the same study estimates that the price increase would also lead to an additional $520 million in annual revenue.

“We note that this has long been a tenet of our investment thesis on the domestic business, as slowing subscriber trends are more than offset by increased monetization,” DiClemente said according to Forbes.

Users might be frustrated with the increasing monthly subscription fee, but there will still be millions of users that will keep paying that $9.99 a month.