Streaming video company Netflix tests per-user pricing

Bloomberg NewsJanuary 1, 2014 

Netflix Canada

Led by CEO Reed Hastings, Netflix, the largest subscription streaming service, is testing new prices based on the number of people who can use an account, a move that could force customers to pay more for additional family members.

ADRIEN VECZAN — 2010 AP FILE PHOTO

— Netflix, the largest subscription streaming service, is testing new prices based on the number of people who can use an account, a move that could force customers to pay more for additional family members.

Netflix is offering some new customers plans that provide access on as many as four screens, letting household members watch different shows at the same time. The monthly prices range from $6.99 to $11.99, according to an offer posted on the Los Gatos, Calif.-based company’s website.

If successful, the pricing plans could be expanded to more customers. The test suggests Netflix, with more than 40 million subscribers, is looking for ways to curb account sharing while providing viewers with more ways to watch, just as cable TV operators rent additional set-top boxes to households.

“I am sure that they have the ability to monitor device use,” said Michael Pachter, an analyst at Wedbush Securities in Los Angeles, who has an underperform rating on the stock. “I admire their resolve to try to combat piracy. This is an ingenious solution.”

The standard Netflix streaming service costs $7.99 a month, according to the company’s website. The DVD-by-mail subscription starts at $7.99 for one disc at a time.

“We test all the time in an effort to come up with better options for consumers,” Jonathan Friedland, a spokesman for Netflix, said in a phone interview. “There are numerous tests at any given time.”

Netflix announced plans for the $11.99-a-month service in April, with Reed Hastings, chairman and chief executive officer, saying at the time he expected fewer than 1 percent of customers to upgrade.

One possible risk for the company is that customers downgrade to the one-screen, $6.99-a-month option rather than pay for a higher level of service.

“If $6.99 enables Netflix to reach more consumers than $7.99 that’s obviously positive, but it’s hard to imagine the $1 being a major price inhibitor,” said Richard Greenfield, an analyst at BTIG. “If consumers who would have taken the $7.99 plan now sign up at $6.99, that all comes out of their profit margin. This is not the next pricing move investors were expecting.”

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