netflixlogoEarlier this year, Netflix reminded its oldest users that the terms of its grandfathered pricing -- which kept these subscribers at the $7.99 level for two years -- would be coming to a close sometime in the second or third quarter of 2016.

In a recent letter to the company's investors, CEO Reed Hastings remarked on the unfortunate churn of its subscriber base who reacted "unexpectedly" to the impending price increase.

The loss of grandfathered pricing places these older users at a new $9.99/month charge for the company's popular streaming service, which Netflix sees as an agreeable compensation for its noticeable uptick in consistent, original programs like Orange is the New Black and House of Cards. These shows debuted in 2013, and the $9.99/month price for new subscribers began just the next year, in 2014. Users can choose to stay at $7.99/month if they wish, at the loss of HD video streaming.

Due to these abandoned users, the company's stock fell 15 percent before its second quarter earnings report, shared yesterday. In the report, Netflix noted that it expected to add about 532,000 subscribers in the United States and 2.10 million internationally in Q2 2016 (just under a 2.5 million goal), but came up short on both goals. The company ultimately netted 160,000 new customers in the U.S. and 1.52 million overseas, landing under 1.7 million total in the quarter.

“Gross additions were on target, but churn ticked up slightly and unexpectedly, coincident with the press coverage in early April of our plan to un-­grandfather longer tenured members and remained elevated through the quarter,” said Netflix CEO Reed Hastings in a letter to investors. “We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering.”

As the price hike began to near in the spring, Hastings admitted that users googling and researching the increase in their subscription cost appears to be consistent with the churn the company has seen this quarter. Despite Netflix's increase in programming, "Whatever the price is for something, people don’t like for it to go up," Hastings admitted, while still claiming that the new price tiers are "working great" for new members.

Tag: Netflix

Top Rated Comments

DogHouseDub Avatar
105 months ago
they'll all come back. What else are you going to get for $9.99 a month that even comes close to Netflix?
Score: 36 Votes (Like | Disagree)
OldSchoolMacGuy Avatar
105 months ago
Who outside Netflix didn't see this coming?

The competition is growing and haven't been raising their rates each year as Netflix has.

While Netflix has put a huge push behind original shows, they've ignored the other side, the people that want shows and movies found on network TV which they'd originally gotten the service to watch. This area has been pushed away while Netflix seems to focus only on the few original shows they're trying to shove down everyone's throats.
Score: 26 Votes (Like | Disagree)
logicstudiouser Avatar
105 months ago
'Unexpected', really?

When you increase the price without adding more value, what did you think was going to happen?
Also, the tiered pricing for quality is a turn off for a lot of people.
Score: 23 Votes (Like | Disagree)
sransari Avatar
105 months ago
Why is 2 bucks such a big deal? Some people are overdoing it and being spoiled, 10 bucks alone per month for a service like that is very remarkable. There used to be a time not too long ago where we paid that same amount for 1 to 2 DVDs.
I think it triggered ppl to reconsider whether they even need the service all together even for the old $7.99/m price. When people are on monthly subscriptions they usually just keep it running without a thought, but when they get notice of a price increase...well, that gets them thinking.
Score: 23 Votes (Like | Disagree)
JWreck Avatar
105 months ago
I'm not sure I agree with everyone's negative opinions on this. I've had Netflix for nearly a decade and can't recall more than 2 price increases? Even if it's more, over that span of time, it seems fair. They're turning into an HBO with programming coming up to match that of HBO and HBO is more expensive still.
Score: 22 Votes (Like | Disagree)
Dydegu Avatar
105 months ago
They push a massive amount of original programming and I'm still able to binge Lost and Breaking Bad. They've also had a really awesome amount of stand up comedy specials and exclusives. An extra two bucks is well worth it. Spotify is $10 for premium, and I think what Netflix offers is even more valuable.
Score: 19 Votes (Like | Disagree)

Popular Stories

iPhone SE 4 Vertical Camera Feature

iPhone SE 4 Rumored to Use Same Rear Chassis as iPhone 16

Friday July 19, 2024 7:16 am PDT by
Apple will adopt the same rear chassis manufacturing process for the iPhone SE 4 that it is using for the upcoming standard iPhone 16, claims a new rumor coming out of China. According to the Weibo-based leaker "Fixed Focus Digital," the backplate manufacturing process for the iPhone SE 4 is "exactly the same" as the standard model in Apple's upcoming iPhone 16 lineup, which is expected to...
iPhone 16 Pro Sizes Feature

iPhone 16 Series Is Just Two Months Away: Everything We Know

Monday July 15, 2024 4:44 am PDT by
Apple typically releases its new iPhone series around mid-September, which means we are about two months out from the launch of the iPhone 16. Like the iPhone 15 series, this year's lineup is expected to stick with four models – iPhone 16, iPhone 16 Plus, iPhone 16 Pro, and iPhone 16 Pro Max – although there are plenty of design differences and new features to take into account. To bring ...
bsod

Crowdstrike Says Global IT Outage Impacting Windows PCs, But Mac and Linux Hosts Not Affected

Friday July 19, 2024 3:12 am PDT by
A widespread system failure is currently affecting numerous Windows devices globally, causing critical boot failures across various industries, including banks, rail networks, airlines, retailers, broadcasters, healthcare, and many more sectors. The issue, manifesting as a Blue Screen of Death (BSOD), is preventing computers from starting up properly and forcing them into continuous recovery...
iphone 14 lineup

Cellebrite Unable to Unlock iPhones on iOS 17.4 or Later, Leak Reveals

Thursday July 18, 2024 4:18 am PDT by
Israel-based mobile forensics company Cellebrite is unable to unlock iPhones running iOS 17.4 or later, according to leaked documents verified by 404 Media. The documents provide a rare glimpse into the capabilities of the company's mobile forensics tools and highlight the ongoing security improvements in Apple's latest devices. The leaked "Cellebrite iOS Support Matrix" obtained by 404 Media...
Apple Watch Series 9

2024 Apple Watch Lineup: Key Changes We're Expecting

Tuesday July 16, 2024 7:59 am PDT by
Apple is seemingly planning a rework of the Apple Watch lineup for 2024, according to a range of reports from over the past year. Here's everything we know so far. Apple is expected to continue to offer three different Apple Watch models in five casing sizes, but the various display sizes will allegedly grow by up to 12% and the casings will get taller. Based on all of the latest rumors,...
tinypod apple watch

TinyPod Turns Your Apple Watch Into an iPod

Wednesday July 17, 2024 3:18 pm PDT by
If you have an old Apple Watch and you're not sure what to do with it, a new product called TinyPod might be the answer. Priced at $79, the TinyPod is a silicone case with a built-in scroll wheel that houses the Apple Watch chassis. When an Apple Watch is placed inside the TinyPod, the click wheel on the case is able to be used to scroll through the Apple Watch interface. The feature works...