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Why Netflix May Not Have a Lot of Room to Hike Rates

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Sep. 18 2018, Updated 3:10 p.m. ET

Streaming providers have gradually been hiking rates

Millions of Americans have switched from traditional cable or satellite TV to streaming video-on-demand services such as Netflix (NFLX). Streaming services have lured consumers with low prices and good programming libraries.

However, it looks like video streaming providers aren’t going to keep prices low for long. Last year, Netflix hiked the rates on a variety of its plans. The streaming giant hiked the price on its premium plan by $2 to $13.99 per month.

Earlier this year, Amazon (AMZN) increased its annual membership rates of Amazon Prime, which includes a free video streaming subscription, by $20 to $119 annually in the United States.

AT&T’s (T) streaming service, DIRECTV Now, recently raised its basic plan by $5 to $40. The carrier’s CEO, Randall Stephenson, has also said that the company is considering increasing rates again.

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Traditional TV subscribers have an advantage

Cord cutters will now have to pay higher prices for streaming services in addition to paying for the Internet. While cable TV can cost more than $100 per month, the Internet can be bundled in. Cable companies charge a higher amount for stand-alone Internet connections, so bundling can be an attractive option.

A typical consumer has more than one video streaming subscription, so further price hikes could put off potential cord cutters. Streaming companies such as Netflix and Amazon continue to pour billions of dollars into programming.

While Netflix is still adding subscribers at a good clip, its growth is slowing, and by the looks of it, the company may not have much room to increase its rates.

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