Netflix may transition to three pricing tiers for streaming video soon

Detailed within a letter sent to Netflix shareholders today, CEO Reed Hastings is considering the addition of new pricing tiers for access to Netflix’s streaming video service. At this time, Netflix offers two pricing tiers for access to Netflix Instant. Those include an $8-a-month plan that allows for two simultaneous streams and a $12-a-month plan that allows for four simultaneous streams at one time. The latter plan was released during early 2013 to appeal to families that wanted to stream multiple television shows and movies at the same time.

According to details within the letter, Netflix management has been beta testing multiple tiers that include one single stream and three simultaneous stream options as well as options that include access to high definition and standard definition resolutions. Ultimately, Hastings wants to move to three new pricing tiers that should be easy for consumers to understand. While Netflix will be rolling out support for 4K programming soon, it’s unlikely that 4K will be part of the pricing tier structure. Netflix believes that the number of U.S. consumers that purchase 4K-capable televisions this year will be “relatively modest,” thus it won’t have a major impact during 2014.


As a nod of respect to current subscribers, all existing members of Netflix Instant “would get generous grandfathering of their existing plans and prices” according to the letter. If you are a current subscriber, there likely won’t be any change to your current rate, unless you specifically alter it. However, all new subscribers will be subject to the new pricing tiers. Timing of the new pricing tier launch is still up in the air though. According to the letter, Hastings said “We are in no rush to implement such new member  plans and are still researching the best way to proceed.” 

Regarding the performance of the company, Netflix outperformed the previous year and added an addition 2.33 million subscribers during the last three months of 2013. This brings Netflix’s total domestic subscriber base to just over 33 million. In addition, Netflix ended the year with nearly 11 million international subscribers. Finishing out 2013 with a total of 44 million subscribers, Hastings projects that the company will end March 2014 with a total of 48 million worldwide subscribers. Interestingly, the DVD rental side of the business continues to quietly chug along with approximately 7 million monthly subscribers. 


Within the letter, Hastings also spoke stringently against Verizon’s successful challenge of U.S. net neutrality rules. Specifically Hastings states “In principle, a domestic ISP now can legally impede the video streams that members request from Netflix, degrading the experience we jointly provide. The motivation could be to get Netflix to pay fees to stop this degradation. Were this draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver.”

Netflix hopes to avoid this situation in order to keep video streams as smooth as possible for subscribers. The company is currently working with Internet service providers in order to help encourage consumers to upgrade to more expensive broadband plans, thus eliminating the need for the ISP to charge Netflix additional fees. Ultimately, anyone considering an early upgrade to access Netflix’s 4K streams will need a hefty broadband connection to smoothly stream the video.

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