Netflix raises prices, offers stream-only service

By Reuters
Posted Nov. 22, 2010 at 8:11 a.m.

Netflix introduced a new plan Monday that, for the first time, relies solely on video streamed over the Internet rather than the DVDs that it has mailed to customers since the company was founded more than a decade ago.

The shift demonstrates how quickly consumers have transitioned from physical media players to digital entertainment that can be browsed, watched again, or discarded without ever having handled a disk.

The company has already said that its members are watching more content streamed over the Internet than on DVDs. To keep customers happy, the company said it will spend more to license streaming content this quarter than it will on buying DVDs.

“We are now primarily a streaming video company,” co-founder and CEO Reed Hastings.

And Netflix said it will also raise prices on plans that include physical DVDs.

That sent shares of Netflix up 9 percent to an all-time high Monday.

Under a plan that allows for one DVD rental at a time, along with unlimited movies and TV shows streamed over the Internet, will cost will be $9.99 per month, a $1 increase.

Current members will see the change in their monthly bill in January, while new members will see the price immediately.

The streaming-only plan will cost $7.99 a month. Netflix already has a streaming service in Canada for a monthly fee of 7.99 Canadian dollars ($7.86).

Netflix ended October with 16.9 million members in the U.S. and Canada and predicted it would gain another 2.1 million to 2.9 million customers by year’s end. That means Netflix could enter 2011 with more than 19 million subscribers, doubling the service’s size in two years.

Netflix, based in Los Gatos, Calif., is spending heavily to obtain the streaming rights to more movies and TV shows to help lure more customers and shift more of its existing subscribers away from DVDs.

In the third quarter, Netflix spent $115 million on video streaming rights, up from just $10 million at the same time last year. Spending on DVDs dropped 35 percent from a year ago to just under $30 million in the third quarter.

Shares of Netflix Inc. jumped $14.97 to $188.04 after reaching as high as $188.18.

Netflix, which gained success as a DVD rental by mail service, has more than 16 million members in the U.S. and Canada. It debuted its first streaming only service in Canada in September.

Netflix has undergone stellar growth since its 1999 debut. Its shares have gained many-fold since a 2002 IPO.

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  1. tracey Nov. 22, 2010 at 9:41 a.m.

    i’m happy to hear this. i just returned a dvd that i had from netflix since april. but i watch the streaming all the time so i’m glad they are adding this option only. :)

  2. Xirtic Nov. 22, 2010 at 9:48 a.m.

    Hopefully this means that they will INCREASE the percentage of their content that is available via streaming. I would much rather stream than wait for the DVDs to arrive like I have been doing.

  3. Rachel Nov. 22, 2010 at 10:20 a.m.

    A couple of times now, I’ve been happily ploughing through a tv series on Netflix streaming, only to find that certain episodes are only avalilable on DVD. This means I then have to add just those discs to my DVD queue on Netflix if I want to watch them. Frankly I won’t move over to only streaming until this kind of thing is fixed.
    Then there’s the added disadvantage of streaming not having captions for the hearing impaired…

  4. mike Nov. 22, 2010 at 10:33 a.m.

    I agree, they need to put more emphasis on streaming selection. Often they’ll have a handful of recent release films…but only temporarily.

    The streaming + DVD deal is great though. I love Netflix.

    But internet providers that also deal in TV programming, e.g. Comcast, HATE Netflix. Comcast sees their customers spending $10/month to watch movies over their infrastructure, instead of paying THEM $6 per pop for On Demand content or an extremely limited free selection…or worse, CANCELING their cable subscription all together.

    This is why the “managed services” portion of the Net Neutrality debate is so important. Comcast and their ilk want to handicap the data-flow for services like Netflix. They are the proverbial foxes watching the hen-house.

  5. halcyon Nov. 22, 2010 at 11:12 a.m.

    You get unlimited DVDs and streaming for $9.99? I’ve been paying that for years for 1 DVD at a time. Do I need to be a new customer to get a better deal?

  6. brad Nov. 22, 2010 at 11:37 a.m.

    Enjoy the bargain you’re getting now, because On Demand will do everything in their power to change this.

  7. garsky Nov. 22, 2010 at 11:47 a.m.

    You get unlimited DVDs and streaming for $9.99? I’ve been paying that for years for 1 DVD at a time. Do I need to be a new customer to get a better deal?

    Unlimited DVDs refers to the total number you can receive in a month. You still only get one at a time.

  8. mike Nov. 22, 2010 at 3:22 pm

    brad, hopefully if the ISP/cable providers try to pull such a stunt, anti-trust litigation will ensue.