Netflix Raises Combination Streaming and DVD Subscription Fee By 60 Percent

12:15 PM PST 07/12/2011 by Paul Bond
Jin Lee/Bloomberg/Getty Images

The price hike comes as the leader in DVD rentals ups its spending to acquire streaming rights to movies and TV shows.

Netflix raised the price of one of its most popular options, which allows for unlimited streaming and DVD’s, by 60 percent per month, the company said Tuesday.
 
The price-hike was accompanied by the introduction of some new DVD-only plans.
 
Netflix had been offering unlimited streaming and unlimited DVDs – one DVD out at a time – for $9.99 per month, but on Tuesday Netflix said the price would be raised to $15.98 per month.

Netflix arrived at the price by splitting the offering: subscribers now can get unlimited streaming only for $7.99 and unlimited DVDs only, one at a time, also for $7.99.

The company also said it will offer a two-out-at-a-time DVD only option  for $11.99.

Despite the significant price hike of the combination offering of streaming and DVDs, Netflix was stressing the lower pricing for the DVD-only subscriptions.

“By offering our lowest prices ever, we hope to provide great value to our current and future DVDs by mail members,” a Netflix executive said in a blog posting Tuesday.

Wall Street cheered the price hike, which was announced in the midst of trading. The stock, which had been down, was up 2 percent by mid-afternoon.

At least one influential analyst, though, decried the price hike as too big, and said it indicates that Netflix is anticipating spending more for content rights and subscriber-acquisition costs as competition ramps up for both.

“An increase of that size is unprecedented,” Tony Wible told clients on Tuesday, prior to Netflix’s announcement when rumors circulated of a coming 50% price hike.

Wible reiterated his “sell” recommendation on Netflix shares and said fair value for the stock is $170. It closed Monday at $290.74.

Netflix has been spending hundreds of millions of dollars lately, up dramatically from just a few years ago, to acquire movies and TV shows for streaming. And with Hulu, Amazon.com and others in the bidding mix, streaming rights have the potential to climb higher fairly rapidly.

Netflix said the price alterations will have the effect of prolonging the life of the DVD for folks who haven’t yet embraced streaming. In fact, Netflix said Tuesday it will establish a “separate and distinct management team solely focused on DVDs by mail,” which will be led by chief service and operations officer Andy Rendich.

“Creating an unlimited DVDs by mail plan (no streaming) at our lowest price ever, $7.99, does make sense and will ensure a long life for our DVDs by mail offering,” Netflix vp of marketing Jessie Becker said in the blog post.

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