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by Dana Harris
July 12, 2011 5:59 AM
11 Comments
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Netflix Announces a 60% Price Hike, Splits DVD and Streaming into Two Businesses

I love(d) Netflix. What about you?

Today, Netflix announced "two significant changes," but there's only one that really matters: The price of your current Netflix plan will increase by 60%.

As of September 1, Netflix members who currently pay $9.99 per month for unlimited streaming and DVDs will pay $15.98 per month. (If you became a member today, the price would take effect immediately.)

You also have the option of two other memberships: DVD only, or streaming only. Those go for $7.99 a month.

Now, beyond the price hike (you'd go from paying $120 per year to nearly $200), what's interesting here is the rationale behind the changes. Yeah, there's the cost of doing business (or as Netflix says, "to better reflect the costs of each"), but it also reflects a missed guess on the part of Netflix: When they launched unlimited streaming last year, they thought DVDs would become something of an afterthought.

Turns out, that's not the case -- so much so, they're creating an entirely separate management team to focus on their discs.

From the Netflix blog:

Last November when we launched our $7.99 unlimited streaming plan, DVDs by mail was treated as a $2 add on to our unlimited streaming plan. At the time, we didn’t anticipate offering DVD only plans. Since then we have realized that there is still a very large continuing demand for DVDs both from our existing members as well as non-members. Given the long life we think DVDs by mail will have, treating DVDs as a $2 add on to our unlimited streaming plan neither makes great financial sense nor satisfies people who just want DVDs. 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. Reflecting our confidence that DVDs by mail is a long-term business for us, we are also establishing a separate and distinct management team solely focused on DVDs by mail, led by Andy Rendich, our Chief Service and Operations Officer and an 11 year veteran of Netflix.

Also of note: The price increase will also help absorb the costs that are certainly on the way from the studios, who are no doubt eager to instill a hike of their own in licensing deals as they come due.

The full blog post follows:

Jessie Becker, here to share two significant changes at Netflix with you.

First, we are launching new DVD only plans. These plans offer our lowest prices ever for unlimited DVDs – only $7.99 a month for our 1 DVD out at-a-time plan and $11.99 a month for our 2 DVDs out at-a-time plan. By offering our lowest prices ever, we hope to provide great value to our current and future DVDs by mail members. New members can sign up for these plans by going to DVD.netflix.com.

Second, we are separating unlimited DVDs by mail and unlimited streaming into separate plans to better reflect the costs of each and to give our members a choice: a streaming only plan, a DVD only plan or the option to subscribe to both. With this change, we will no longer offer a plan that includes both unlimited streaming and DVDs by mail.

So for instance, our current $9.99 a month membership for unlimited streaming and unlimited DVDs will be split into 2 distinct plans:

Plan 1: Unlimited Streaming (no DVDs) for $7.99 a month
Plan 2: Unlimited DVDs, 1 out at-a-time (no streaming), for $7.99 a month.

The price for getting both of these plans will be $15.98 a month ($7.99 + $7.99). For new members, these changes are effective immediately; for existing members, the new pricing will start for charges on or after September 1, 2011.

Why the changes?

Last November when we launched our $7.99 unlimited streaming plan, DVDs by mail was treated as a $2 add on to our unlimited streaming plan. At the time, we didn’t anticipate offering DVD only plans. Since then we have realized that there is still a very large continuing demand for DVDs both from our existing members as well as non-members. Given the long life we think DVDs by mail will have, treating DVDs as a $2 add on to our unlimited streaming plan neither makes great financial sense nor satisfies people who just want DVDs. 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. Reflecting our confidence that DVDs by mail is a long-term business for us, we are also establishing a separate and distinct management team solely focused on DVDs by mail, led by Andy Rendich, our Chief Service and Operations Officer and an 11 year veteran of Netflix.

Now we offer a choice: Unlimited Streaming for $7.99 a month, Unlimited DVDs for $7.99 a month, or both for $15.98 a month ($7.99 + $7.99). We think $7.99 is a terrific value for our unlimited streaming plan and $7.99 a terrific value for our unlimited DVD plan. We hope one, or both, of these plans makes sense for our members and their entertainment needs.

As always, our members can easily choose to change or cancel their unlimited streaming plan, unlimited DVD plan, or both by visiting Your Account.

11 Comments

  • C | July 13, 2011 8:30 AMReply

    I will be cancelling my service also. There is too limited content on streaming to justify the price increase. Later Netflix hello red and blue box.

  • AnnGregory | July 13, 2011 7:04 AMReply

    MSNBC offered some Netflix alternatives earlier today. An option is the TVDevo website which seems to run faster and it supports slower connection speeds. Also has worldwide channels that regular cable doesn't offer at all.

  • anonymous5 | July 13, 2011 4:00 AMReply

    When Netflix has the exact same content and quality on DVDs AND streaming, then we'll talk. But for a crappy and less than stellar visual quality streaming selection? This is surely a joke.

  • Cookie | July 13, 2011 2:43 AMReply

    This does not affect me at all. I hardly ever watch Netflix anyway so as long as the don't increase the unlimited streaming I am in good shape.

  • barb | July 12, 2011 12:40 PMReply

    So they anticipated that ordering actual DVDs would decrease? Maybe it would, if they had streaming for all movies at better quality. I'd love to do streaming only, but most of their streaming only selection sucks. It is getting better, gradually, and I look forward to the time when every movie can be streamed, and at higher quality.

  • Anonymous4 | July 12, 2011 11:53 AMReply

    I will be cancelling my subscription. 60% - you have got to be kidding! I mainly did it for the DVDs. If they had current movies to stream I would stay. Same thing happened with BlockBuster with their price increases - they drove it up and I bailed. I can live with Redbox and other streams. Bye-bye NetFlix!

  • Anonymous3 | July 12, 2011 9:54 AMReply

    Redbox here I come!

  • Anonymous2 | July 12, 2011 9:35 AMReply

    Yup, cancelling my account too. If EVERYTHING available on DVD was available for streaming - it makes sense. However, only 50% of content available to stream.

    When the kids want to watch a movie on Tues night - its a little too late to DVD it via mail. I stream them something. My movies I get via mail. To pay 60% more for the service isn'tn worth it. I'll get movies on demand from cable or download them via fileshare.

    Now is the time for Blockbuster on demand to get an offering out there!

  • Anonymous | July 12, 2011 9:24 AMReply

    I am cancelling my account now. The LOW price was the factor that edged me over from downloading, to getting my movies legally; now they take away the one thing I had gotten the service for. Its very hard to compete with free, especially when you INCREASE the price. Well, back to illegally downloading.

    R.I.P. Netflix: 1997-2011

  • netflixJunkie | July 12, 2011 8:34 AMReply

    It's much less of an increase if you had a more expensive plan. I have 2 DVDs+Streaming, and the monthly bill is only going up 33%. From $14.99 to $19.99.

    Frankly, I was expecting this to happen. They had to lose money on streaming just to get us to try it, and now they can charge for it. $20 per month for 2DVDs at a time plus streaming on set-top, mobile devices and computer is pretty sweet.

  • Jdizzle | July 12, 2011 8:23 AMReply

    Netflix needs to update their streaming options. Watching older movies/Tv shows at a low quality doesn't cut it.