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Netflix NFLX announced price increases for all three of its U.S. streaming plans on Jan. 15. The increases, which range from 13% to 18%, will take effect immediately for new subscribers while existing subscribers will see the new prices over the next three months. While the timing of the announcement two days before releasing earnings is a little strange, the price increases are in line with the firm's need to generate additional revenue to help offset the ongoing cash burn which is projected to be $3 billion in both 2018 and 2019. We expect that the firm will likely lower its prices in overseas markets like India where its current prices are well above its competitors. We are maintaining our narrow moat rating and fair value estimate of $120.

As a result of the price hikes, the standard Netflix HD and the 4K family plans both increase by $2 to $13 and $16 per month, respectively, and the base plan now costs $9 per month, up from $8 previously. The price hike potentially increases the attractiveness of Disney+ which we expect to debut in the fall at a sub-$10 price point. We also continue to believe WarnerMedia's planned subscription video on demand, or SVOD, offering at a price above $15 is a strategic blunder as the firm needs to gain traction in what will be a highly competitive marketplace in 2019 and beyond. Conversely, NBCU's announcement on Jan. 14 that its new SVOD offering will be free to existing pay-TV customers looks to us like a sensible approach to quickly build an audience.