The price hike follows a rise of $20 in the annual fee Amazon.com Inc. (NASDAQ: AMZN) charges for Amazon Prime, which includes a subscription to Amazon Instant Video in the $99 annual fee. The behemoth of streaming video, Google Inc.’s (NASDAQ: GOOG) YouTube, is still mostly free, with more paid channels becoming available all the time.
Rising costs for content, whether original productions or licensed video, are driving acquisition costs for Netflix and Amazon higher. In order to compete with all the other sources of video entertainment, the streaming companies need constantly to refresh content. The content producers can and do drive hard bargains.
When Netflix and Amazon produce their own programming, they get to keep all the distribution fees, but hit shows like Netflix’s “House of Cards” are not guaranteed, and developing several original programs at the same time gets very costly for a company with a main line of business that is something else.
It is unlikely that Netflix will face the same revolution over the price hike that it felt when it introduced the ill-fated Qwikster spin-off back in 2011.
Netflix shares were down about 0.3% just before noon on Friday, at $320.80 in a 52-week range of $205.75 to $458.00.
ALSO READ: Netflix Price Increase Will Help Amazon
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