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Netflix has informed its customers that it is raising prices by $1 per month for its video streaming service - but only for new customers. The company's 36 million existing US customers are grandfathered with existing prices for at least two years.

The Associated Press writes that "the price increase, Netflix's first in nearly three years, isn't a surprise. The Los Gatos, California-based company disclosed its plans to raise its rates last month without specifying the precise amount." The price of DVD rentals remains unaffected.

The sense is that Netflix is excluding existing customers from the price increase as a way of avoiding the backlash it face din 2011 when it simultaneously tried to raise prices and separate its streaming and DVD rental businesses. The result was the loss of 800,000 customers and a plummeting stock price.

Now, however, Netflix has recovered and says it needs additional revenue as a way of producing more original content like "House of Cards," which it uses to differentiate itself not just from other rental and streaming services, but also from companies like HBO and the broadcast networks.
KC's View:
It is all about value. From my perspective, I find the value I get from Netflix - especially when it comes to streaming movies - to be extraordinary. I'm happy to pay more, even though they're not asking me to. (Not yet, anyway.) I find the differential advantages they provide to be worth every penny I pay, and more.

That's a good lesson. Provide real value, exceptional content and great service, and maybe your customers will worry a little less about what you charge. Maybe not always, but sometimes … and enough to give you a sustainable competitive advantage.