SAN FRANCISCO - Netflix is testing a cheaper subscription for new customers as the online video company prepares for what likely will be another competitive onslaught from Amazon.com in 2014.
Netflix, the biggest video streaming service, is offering a $6.99 per month plan that lets people watch on only one screen at a time. The company's basic streaming service currently costs $7.99 a month and lets customers watch on two screens at the same time.
The new offer, which was posted on the company's website, is part of a broader set of subscriptions for new customers based on how many screens they use to access the service. Prices start at $6.99 and go up to $11.99 for viewing Netflix on as many as four screens simultaneously.
Netflix is trying to increase the revenue it gets from subscriptions to help it buy more licenses to stream movies and TV shows and pay for the creation of its own content, such as 2013 shows like House of Cards and Orange is the New Black.
The company is also competing with Amazon.com's video streaming service that is included in its Prime subscription, which offers free two-day shipping for $79 a year in the U.S.
"The new plan likely has at least two goals: 1. Attract the more value conscious consumer. 2. To more effectively compete with Amazon Prime," Arvind Bhatia, an analyst at Sterne Agee, wrote in a note to investors Tuesday.
For $79 a year, Amazon Prime subscribers get free access to the Prime Instant Video streaming service for effectively $6.67 a month.
"While the lower price could attract new subscribers, it could also somewhat cannibalize current subscribers given how easy it is to cancel and re-signup for the service," Bhatia said.
The move may also weaken Netflix's ability to raise prices in the future, which is an important part of the long-term bull thesis on the stock and is needed to offset rising content costs, he added.
Netflix shares slipped $1.23 to $365.76 on Tuesday. Amazon shares climbed $3.45 to $396.82.