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Netflix Makes $1 Billion in 1st Quarter But Is Still Raising Prices?

Netflix said Monday that its first-quarter revenue topped $1 billion and that its subscriber base grew more than expected to 48 million members worldwide.

The net profit of $53 million, or 86 cents per share, beat analysts’ estimates of 83 cents a share. It also beat the company’s own forecast of $48 million and earnings per share of 78 cents.

The company also plans to raise prices for new members — something that could also temper cancellations and renewing of subscriptions based on availability of content such as a new season of “House of Cards.”

“Our current view is to do a one- or two-dollar increase, depending on the country, later this quarter for new members only,” said CEO Reed Hastings and CFO David Wells in comments accompanying the earnings report. “Existing members would stay at current pricing (e.g. $7.99 in the U.S.) for a generous time period. These changes will enable us to acquire more content and deliver an even better streaming experience.”

Netflix is making that move from a position of strength, says Mark S. Mahaney, managing director of Internet for RBC Capital Markets. “Across the Internet we’re seeing companies like Amazon, Pandora and Netflix all of them are raising prices one way or another,” he says. “I don’t think too many consumers are going to be put off by spending a dollar or two a month for the quality, the quantity of content that Netflix has. I think they are coming from a position of strength.”

Among Netflix’s good first-quarter signs was an increased rate of growth in new U.S. streaming subscribers in the first quarter of 2014, an additional 2.3 million, compared to 2 million in the same quarter last year. “You don’t normally see that. Normally, the bigger the company gets the harder it is to add subscribers,” Mahaney said. “That tells you that the value proposition is getting stronger.”

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