Netflix, Inc. (Nasdaq: NFLX) is once again raising the monthly price of its most popular streaming subscription packages. Netflix stock jumped more than 5 percent on Thursday on investor optimism that the price hike will help Netflix boost free cash flow as it continues to beef up its content library.
Netflix is raising the price of its most popular HD streaming plan roughly 10 percent from $9.99 to $10.99 per month. In addition, it is raising the price of its premium plan by 17 percent from $11.99 to $13.99 per month. The basic non-HD streaming plan will remain $7.99 per month.
The price increase will go into effect on current subscribers’ next billing cycles.
“From time to time, Netflix plans and pricing are adjusted as we add more exclusive TV shows and movies, introduce new product features and improve the overall Netflix experience to help members find something great to watch even faster,” the company said in a statement.
While the price hike should boost Netflix’s revenue per user, it could also negatively impact subscriber growth. A similar $1-per-month price hike in 2015 resulted in Netflix subscriber growth dropping to a three-year low by mid-2016.
RBC Capital Markets analyst Mark Mahaney says investors shouldn’t be concerned about a similar slump in subscriber growth this time around.
“We believe that Netflix’s pricing power has increased materially over the past few years as their content slate and technology has improved,” Mahaney wrote on Thursday, according to Bloomberg.
Netflix has been spending so aggressively on growing its original content library and expanding its international presence that the company reported a net free cash flow deficit of $1.7 billion in 2016. Netflix is planning to spend $15.7 billion, or roughly 19 percent of its current market cap, on content in the next several years. The company is coughing up $6 billion on content in 2017 alone.
CFRA analyst Tuna Amobi says the positive market reaction is a sign investors expect customers to still value Netflix’s service, even at a slightly higher price.
“All in all the market is viewing this as a positive and something that will hopefully support more innovation on the platform,” Amobi said, according to USA Today.
Netflix has been…
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