Entertainment

Netflix Increases Their Fees For Grandfathered Accounts Starting May 2016

Published on: April 8, 2016 at 9:12 AM
By Skinner Bachs

Netflix fees are set to increase for grandfathered clients starting in May 2016. Customers who were already subscribed to Netflix’s streaming service in May 2014 were given a two-year reprieve from the fee increase. According to Business Insider , this increase will affect 37 percent of Netflix’s client base , meaning that around 17 million households will see an increase in their streaming bill.

A UBS study on Netflix’s decision to increase their streaming fees for over a third of their customers indicated that 41 percent of the people responding stated they would get rid of Netflix. A spokesperson person for UBS explained that this might be a much higher figure than the actual number of subscribers who will hit the unsubscribe button. The UBS report, which is based on a J.P. Morgan survey, takes one very important variable into account: human behavior.

“For those less familiar with how consumers typically respond to survey questions regarding subscription service price increases, it is uncommon for consumers to admit they are willing to pay more for most services. 41% of respondents in our survey were not willing to accept any price increase for Netflix, which is actually very positive when compared to 68% for pay TV. Consider pay TV costs have been rising 3-5% annually and the industry is now losing only 1% of customers each year, relative to 68% of pay TV customers in our survey indicating no tolerance for price increases.”

The actual number of Netflix customers who will walk away once the fees go from $7.99 to $9.99 per month will actually be closer to 3 to 4 percent. A UBS analyst stated that there is a given percent of respondents who will never agree to pay more than they already pay.

One of the key factors that will keep customers is cost. Even with the increased fees, Netflix still beats cable and satellite services when it comes down to an actual per-unit price point. On average, Netflix costs around nine cents per streamed hour, while other sources of broadcast television cost roughly 30 cents per hour.

While this may not be catastrophic for Netflix, the streaming giant has burned away much of the goodwill they netted when they agreed to not raise fees for existing customers two years ago. Last month, the Inquisitr reported that Netflix admitted to throttling streaming speeds to wireless customers. Outrage at this move by Netflix was not quelled by the company’s official stance that they were simply trying to protect their wireless subscribers from having increased data fees due to binge watching their favorite programs on mobile devices.

Unimpressed subscribers have been a thing with Netflix. When the service expanded to include Australia and New Zealand, many customers in the Antipodes found themselves billed multiple times. As reported by the Inquisitr in May of 2015, some subscribers Down Under found their bank accounts took big hits because of the glitch in Netflix’s automated billing system.

Later in 2015, the Independent’s Christopher Hooton wrote about Netflix’s removal of the U.S. version of The Office . British fans of the series may love their homegrown bad boss David Brent, but the loss of Michael Scott was almost too much. At the time, there was a huge outpouring of ire on Twitter over the move, which took many English subscribers by surprise.

In the U.S., the biggest points of contention have always been changes in the service itself and fees. The latest increase in fees was announced two years ago as a response to the prospect of losing subscribers. Kerry Close for Money reports that this increase might come as a surprise for as many as 80 percent of the subscribers grandfathered into the 2014 agreement. While it is perfectly legal — in fact, it’s contractually locked in — it might be seen by many as an act of bad faith on Netflix’s part.

[Photo by Pascal Le Segretain/ Getty Images ]

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