This article is more than 1 year old

This article is more than 1 year old

Netflix is to raise its US prices for the first time since 2017, a move designed to alleviate a large, debt-fueled $13bn investment in new films, series and documentaries this year – as well-funded competitors emerge in the content streaming business.

The subscription price hikes, which constitute a jump of between 13% and 18%, take effect immediately for new customers but will be phased in gradually for existing subscribers over the next three months.

Wall Street welcomed the move, sending Netflix shares higher as investors anticipate more revenue for the streaming giant. The stock rose as much as 6.8% to $355.50, accelerating a tear that has seen shares rise 40% since 24 December.

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The streaming service, which counts 58 million subscribers in the US and has shaken up the traditional model for both television and movie studios, is confident that subscribers will not shy from increased prices.

Netflix’s previous subscription increase in 2017 did little to slow growth, as Netflix added 24 million customers that year.

“We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience for the benefit of our members,” Netflix said in an emailed statement on Tuesday.

Under the new terms, Netflix’s cheapest basic plan will cost $9 a month, up from $8; its most popular HD standard plan will cost $13, up from $11; and its 4K premium plan will cost $16, up from $14.

The companyis expected to show strong growth when it reports its earnings on Thursday. It has been winning acclaim for its original productions, including Stranger Things, The Crown, Bird Box and current hit Tidying Up With Marie Kondo, and shows no signs of letting up.

However, the company has been burning through cash – as much as $3bn in 2018 – to contain threats from Amazon, Disney and Apple, all new entrants to the streaming business that have promised significant investments in original content.

On Monday, Comcast-owned NBCUniversal announced it would launch a new

streaming service in 2020. Disney is also set to launch its Disney+ service later this year.

If analyst predictions prove correct, the efficacy of Netflix’s subscription model will be borne out on Thursday when it reports 9.2 million new subscribers for the last three months of 2018.

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That was also underscored by the company’s strong showing at the Golden Globes, where it won five awards, more than any other network or studio.

In a note to investors, Goldman Sachs predicted that the results “will only be the beginning of the pay-off from Netflix’s accelerating spend and increasingly robust originals slate”, adding that “consensus continues to significantly underestimate the financial impacts of these dynamics”.

UBS said Netflix would “achieve a higher margin and free cash flow trajectory than currently implied by the market” as its original content “demonstrates outsize marketplace success”.

But emerging competition is likely only to increase pressure on Netflix to redouble its efforts. Jeff Bock, an analyst at Exhibitor Relations, recently predicted that the emerging dogfight for talent could end up replicating film’s studio system of its early years.

“This reminds me of Hollywood in the 1920s and 1930s, when studios were hiring so many people to roll out content as quickly as possible, because there was so much appetite for it. You just wanted content, it didn’t matter what it was. That’s what it feels like Netflix is doing now.”