Netflix Isn't Going to Jack Up Your Rates Anytime Soon

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Netflix Inc. Illustrations Ahead Of Earnings Figures
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Netflix (NFLX) investors were cheering another blowout quarterly report last week, but it didn't take long for Netflix customers to start worrying. Several popular sites began running stories suggesting that it was going to start costing more to enjoy the leading premium video service in the near future.
Here's just a sample of some of the headlines.
  • Netflix Just Announced Some Pricing News That Will Leave You Heartbroken -- Uproxx
  • Netflix CEO: Brace for Higher Prices -- Daily Beast
  • Upcoming Netflix Price Hike Is Breaking Many Cord-Cutters' Hearts -- Tech Times
  • This Netflix News Will Leave You in Tears -- Seventeen Magazine
This would seem to be devastating news. Outlets are playing this out as a tear-inducing, heart-shattering event that you will need to brace for in preparation. Thankfully, it's not that bad. You will likely be paying more for Netflix in the future, but it's not going to be as traumatic as the media would have you believe.

Get to Know Your Grandfather a Little Better

Longtime subscribers may very well be paying more as early as next year, but that's not exactly news. Netflix bumped the monthly rate of its popular streaming plan to $8.99 a month from $7.99 a month for new subscribers 14 months ago.

If you're still paying $7.99 a month, that means that you've been an active subscriber since springtime of last year. Netflix promised to grandfather in existing members at the time, through at least the next two years. In other words, your rate may go to $8.99 come May of next year, but you should have known that for more than a year.

House of Shards

The headlines following last week's report suggest a big hike is coming, but that wasn't what CEO Reed Hastings said at all.

%VIRTUAL-pullquote-Over the next decade, I think we'll be able to add more content and have more value and then price that appropriately.%"We want to take it very slow," was what he said in addressing how his company may pass on the escalating costs of content to its viewers. "Over the next decade, I think we'll be able to add more content and have more value and then price that appropriately."

So let's break that down. He's not talking about pricing a better product higher now. He's talking about something that will happen over the next 10 years. If anything, it's pretty comforting to hear. Unlike your cable or satellite television bill, which seems to creep higher with every passing year for the exact same product, another price hike could be years away and only when the quality has improved to justify the move.

It also bears reminding that Netflix now has more than 65 million streaming subscribers worldwide. As it continues to grow, it will be able to spread its growing content costs across a wider membership base. It isn't until Netflix's subscriber count starts to shrink that you should get nervous or brace for a material hike. Netflix knows that its model is based on growing its audience, and the last thing it wants to do is price itself out of that growth.

Dig beneath the inflammatory headlines. Take a deep breath. Binge.

Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. Check out The Motley Fool's one great stock to buy for 2015 and beyond.
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