Netflix Announces Price Increase

Netflix will separate DVDs-by-mail and online streaming into two separate services. It will also raise the price on bundling the two services together.


Netflix has hiked its prices. The Internet video rental company has long offered a package of unlimited streaming and unlimited DVDs by mail for $9.99.

NPR's Nina Gregory has details on the new pricing.

NINA GREGORY: Netflix announced the new pricing by saying it's offering subscribers its quote, "lowest prices ever for unlimited DVDs." That's technically true - unlimited DVDs by mail, sent one-at-a-time, will now cost $7.99 a month - down from $9.99 a month. However, in the old plan, unlimited streaming of movies from the Internet was also included. Now, the company will break apart that bundle and charge for each service. So a bundled plan that used to cost $9.99 a month will now cost $15.98 a month.

So why is the company raising its rates?

Mr. DANIEL ERNST (Research Analyst, Hudson Square Research): The simple reason is because they can.

GREGORY: That's Daniel Ernst. He's an analyst at Hudson Square Research.

Mr. ERNST: They don't really have competition. They have some competition at the margin but the reality is, there is no one offering a full slate of movies and television shows that's digital and in DVD.

GREGORY: Mike Olson is an analyst at Piper-Jaffrey. He says while that's true, the desire for bigger profits is driving the price hike.

Mr. MIKE OLSON (Research Analyst, Piper-Jaffray): The bottom line is Netflix is looking to increasingly shift the subscriber base over to streaming only as quickly as possible because streaming subscribers are more profitable subscribers.

GREGORY: The new rates will go into effect for existing subscribers on September 1st, and for new subscribers, immediately.

Nina Gregory, NPR News.

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