The video giant said Monday it will soon raise prices for new customers of its streaming service by $1 or $2 a month as it bets its growing slate of original content will continue to draw subscribers. Existing customers will continue to pay current prices for a time.
Wall Street analysts praised the coming hikes as a way to drive profitability as Netflix continues to spend on new content -- including originals such as
"Price increases over time should allow Netflix to add content and keep its subscriber base satisfied," said Michael Pachter of Wedbush Securities, in a note to clients. "Netflix management has done a masterful job of driving subscriber growth and managing content spending in recent years, resulting in sustained subscriber gains and improving profitability."
However, Pachter added, even a modest price increase could slow subscriber growth.
The Los Gatos, Calif.-based company's stock rose Tuesday. In midday trading, shares were up by $18.45, or more than 5%, to $366.94 a share.
Cowen & Co. analyst John Blackledge said the first-quarter subscriber numbers exceeded his expectations, partly because of the popularity of Netflix's own shows. The
"The strong subscriber number were mostly attributed to high user satisfaction driving better word of mouth, partially driven by strong original content like Season 2 of 'House of Cards,' " Blackledge wrote.