Netflix Plans to Have a Three-Tiered Pricing Structure

Netflix is gearing up to overhaul it pricing structure. According to a shareholder letter and interviews with Gigaom, the streaming site will introduce a new three-tiered system for its customers.

Writing in a fourth-quarter letter to its shareholders on Wednesday, CEO Reed Hastings and CFO David Wells explained:

"Last April we introduced a 4-concurrent stream $11.99 option to begin our evaluation of plan tiering. Since late last year, we have also been testing 1-stream and 3-stream variants, as well as SD/HD variations, at various price points. Eventually, we hope to be able to offer new members a selection of three simple options to fit everyone's taste."

They added that there would be "generous grandfathering of their existing plans and prices," and that they are in "no rush to implement such new member plans and (are) still researching the best way to proceed."

So what form, exactly, would that three-tiered system take? We're not really sure! But, Hastings did explain to Gigaom that the tiers wouldn't be content-specific, so paying more won't provide more variety. Instead, they want a "good-better-best price tiering" where other features—like a varying number of simultaneous stream—provides the value.

Netflix has, of course, already experimented a little with that, with family-plan type pricing which allows for four devices to stream at once, for an additional $4 per month. But it remains unclear if the lowest tier would maintain its $8-for-two-streams status, or whether new members may have to pony up more to get the same features current customers already enjoy. There may be scope for other features adding value, too, though it's currently unclear what those would be, too. [Gigaom]

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