Netflix to Raise Prices for New Users

The streaming service announces plans to increase subscription fees for new users by $1 or $2.
5:12 | 04/22/14

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Transcript for Netflix to Raise Prices for New Users
Yeah -- yeah that hit the market. -- -- but -- we have big numbers today one or two dollars that's how much Netflix as it will raise its monthly subscription prices for new costs. Hello everyone I'm Michelle Franzen in New York for more on how those one or two dollars can add up quickly I want to bring -- -- task from Yahoo! finance so Aaron give me an idea how well this one or two dollars. Work at Netflix and what's going there. Right -- Netflix -- become incredibly popular with users -- in part in large part because of its. Original programming house of cards aren't as the new black being the most obvious examples. And that's a very expensive proposition so. They are saying they're gonna raise prices on new customers only 100 dollars depending on what country because -- -- do you play globally. In order to help subsidize. Those costs and pay for new programming that they're looking to develop. CEO Reed Hastings was careful to point out that with that new increase Netflix also improve its services. Buying more content and delivering better video -- -- The -- -- own homes streaming in of the crowd at one right now so how is Netflix doing in this competition. Well right now -- Very well I mean they they are bigger than HBO in the United States which is a very big deal and they are the the leader in that space but they do you face intense competition. Most notably from Amazon.com. Which is. You know got a lot of money and they said that they -- gonna develop original content to try to compete. Directly would Netflix and if you have Amazon prime you -- -- get free. Movie streaming through that. My -- guy who has said we're gonna develop -- programming as well Hulu as a player there. So pretty much you know a lot of big players apple. Is often speculated about what they're gonna do -- -- video streaming so that there's a lot of competition right now Netflix is the leader. And again they're saying that they need and another -- to. A month to maintain that -- continue to provide the kind of content that many of us -- become addicted to I got my hand -- there. But you know I think also for them if you have streaming Netflix you'll notice that their selection of movies to stream right now is not great. So and efficiency and a -- and an addition to creating new programs of their own they're also hopefully -- improve the library of what you can stream. You know wasn't too long ago that Netflix -- business model was not looking too good of course -- -- you know take out blockbuster but back in 2011 Netflix also tried to raise prices. And that didn't turn out so well the announcement has been hailed by investors what's changed in these three years with Netflix -- -- Really turned their business model into something that's profitable. Right well it's really amazing that was three years ago that's when they said they -- gonna split. Off the dvd business into some -- quick stir and mistreating business was -- -- Netflix and there -- gonna charging 799 for each of those services. They -- you just have one of the other. And subscribers investors freaked out they lost about 800000 subscribers -- stock fell. More than 75%. From peak to trough at that point Reed Hastings. Who -- -- -- -- Netflix is still is you know was. Widely hailed as the worst CEO and America had destroyed the company in it was a near death experience but obviously they learned their lesson. They undid that they apologize they say that was a mistake. We realize the -- don't like -- they went back to the -- that. Current and -- prior model of Netflix as -- as one service you can pick and choose your tiers of service I'm and I think since then they've done just about everything in raid. And not dissimilar to an Amazon recently raise the price of Amazon prime the feeling right now on -- is that people have become so. -- -- condition and love Netflix that they're -- to be willing to pay another extra couple bucks to get that service and when you have that kind of a business in this kind of economy. That's a very powerful thing and how important do you think that originals sort of production networks they house of cards are all those shows are to these companies -- -- -- Netflix. Well I do think it's critical because I think that's the thing that's gonna get you in the door. To Netflix and then when you're there. And what their brilliant at doing and really better than anybody else is if you like this kind of program -- movie. You might also like these other kinds of programs or movies and and there are operatives are really the best in the world right now. I'm -- serving you up other content that they think the you'll like based on your your existing prior. Viewing so if they -- -- become the -- house of cards or oranges and -- black or whatever the of the program is. They've got a very good shot of keeping you at Netflix by serving -- -- other contents. Which then becomes self fulfilling the more country you watch them better they're gonna Serbia the more kind -- you watch the more time he's been on Netflix. The more you willing to say wow this is a great deal. At 799999. Or whatever the price point is and you are really in their view you know customer for life that's what they're -- -- -- Aaron task from Yahoo! finance thanks for joining us. Of course can keep up with the latest headlines right here on abcnews.com. You've been watching the big number I'm Michelle Franzen in New York.

This transcript has been automatically generated and may not be 100% accurate.

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