Netflix to separate DVD, streaming plans

Subscribers could see rates rise by as much as 60 percent

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SAN FRANCISCO --- Netflix is raising its prices by as much as 60 percent for millions of subscribers who want to rent DVDs by mail and also watch video on the Internet.

The company is separating the two options so subscribers who want both will have to buy separate plans totaling at least $16 per month. Netflix Inc. had been bundling both options in a single package, available for as low as $10 per month.

New subscribers will have to pay the new prices immediately. The changes take effect Sept. 1 for current customers.

Netflix isn't changing the $8 monthly price for an Internet streaming-only option, which the company began offering late last year. But instead of charging $2 more for a plan that also offers one DVD at a time by mail, the company will charge $8 for a comparable DVD-only plan. That brings the total to $16.

Those who want to rent up to two DVDs at a time with streaming will pay $20 per month. Those wanting three DVDs at a time with streaming will pay $24 per month.

When Netflix unveiled the streaming-only option, it also raised the rates for its most popular DVD rental plans by $1 to $3 per month. Those plans included unlimited online streaming, too, as had been the case since Netflix began sending video over high-speed Internet connections in 2007. That means longtime subscribers who want both options will get their second price increase in eight months.

Netflix's willingness to risk alienating subscribers signals that it needs to bring in more money to cover its rising costs.

The company's earnings would likely be squeezed if it continued to cover the overhead for buying and shipping the discs while also spending heavily to license more video for its streaming library. In the first three months of this year, Netflix spent $192 million on streaming rights after pouring $406 million into the library last year.

Jessie Becker, Netflix's vice president of marketing, wrote Tuesday on Netflix's blog that charging just $2 more for a bundled plan "neither makes great financial sense nor satisfies people who just want DVDs."

Investors seemed to welcome the higher prices. Netflix's stock rose 53 cents to close Tuesday at $291.27.

Netflix's market value has increased by seven-fold and created about $13 billion in shareholder wealth during the past two years, largely because its total subscribers have more than doubled during the same stretch.

As of March, Netflix had 22.8 million subscribers in the U.S. -- about 34,000 more than the number of households subscribing to Comcast Corp.'s cable-TV service.


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