As Netflix begins to phase out its grandfathered subscription prices in the U.S. – raising monthly rates for some subscribers by as much as $2, from $7.99 or $8.99 to the current price of $9.99 – the SVOD provider could see as much as $520 million per year in additional revenue, according to a Nomura Securities report.
For a service that is spending around $6 billion this year on both licensed and original content, and is working to gain traction in its newer international markets, that could add some needed cash to Netflix's coffers.
But it could come with a catch: Around 480,000 U.S. subscribers could cancel their Netflix service rather than pay the incrementally higher cost, Nomura analyst Anthony DiClemente said in a research note reported by Variety.
The analyst estimated a 2 percent churn rate among subscribers whose monthly rate rose by $2, and a 1 percent churn rate among those who will pay just $1 more per month. DiClemente also cut his price target on Netflix from $125 to $115 per share based on Nomura Securities' lowered estimates for international subscriber growth in the second half of 2016.
It's not all bad news for Netflix, however. Even with the churn in grandfathered subscribers – one that CEO Reed Hastings said the company is expecting – that $520 million should still be realized this year. The SVOD provider will likely add another half-million subscribers in the U.S. for the second quarter of 2016, and 2.1 million international subscribers in the same period.
Netflix will report its second-quarter earnings on July 18.
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