Netflix Jacks Monthly Subscription Price By 60%

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Bad news today for Netflix subscribers. The streaming and DVDs-by-mail company sent out a message to its members explaining new price changes and plans for its subscription service.

Instead of offering a combined $9.99 plan, which includes unlimited streaming and DVDs by mail (one out at-a-time), Netflix said it will split the service into two distinct plans, beginning in September. At that point, consumers can either purchase an unlimited streaming-only plan, for $7.99 per month, or an unlimited, one-out-at-a-time DVD plan for the same price. (Two-out-at-a-time will cost $11.99.)

But to receive both streaming and DVD-by-mail (one-out-at-a-time) benefits, subscribers will now have to pay $15.98 per month, or roughly $191 per year--a 60% increase from the original combined plan.

The price changes come as Netflix looks to push more of its users to streaming while not cannibalizing its DVD business. As CEO Reed Hastings has said, "By every measure, we are now primarily a streaming company that also offers DVD-by-mail.” Last year, the company introduced a $7.99 streaming-only service, which many saw as a competitor to Hulu Plus. But with its new price plan, Netflix is clearly looking to either drive users to its streaming platform, or keep them solely renting DVDs--if they'd like both services, they're going to have to pay for it.

The reason is clear: The more benefits Netflix provides--online and disc content, streaming, postal delivery--the more expensive the service is to offer, especially as its usership continues to rocket.

If prices for its plans do not go up, Netflix will not be able to sustain its business model. In the past few years, the company has seen its revenue per use go significantly lower, from about $17 in 2006, to around $12 this past quarter.

Writes Netflix in a blog post:

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.

With the price increases, what will you do with your Netflix plans, Fast Company readers? Will you upgrade to the $15.98 combined plan? Stick just with streaming-only plan? Or opt for the new $7.99 one-DVD-out-at-a-time plan?

[Image: Flickr user Micah Taylor]

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16 Comments

  • Logan J Vickery

    I'm waiting (possibly fruitlessly) for Netflix to offer a premium option that offers better content.  I put a lot of faith into streaming, but it may take someone else to beat them to it to make them release they need keep innovating.

    As for the price- I think it makes sense.  I don't order DVD's by mail (just stream), I get new releases from for $1 from mostly blockbuster.  I occasionally pay for the "premium" movies.

  • Mile High Business Plans

    This is just the next step in the process. Within 5-10 years every movie will be available online within 3 mo's of leaving theaters and you'll pay a cable-like subscription price of $35-70/month. But if they have all your Movie/TV shows on there, and you can watch them anytime... do you really need cable?

  • william leis

    I too will be dropping my subscription after August. Its not about the 60% increase as it is the fact that in todays struggling economy they want to take advantage of us. I stopped renting from Hollywood and blockbuster and look what happened to them. If enough people stop maybe the company will think twice.

  • J White

    This is hardly bad news for me as a Netflix subscriber. Any alternative to having to deal with Time Warner and other "too big to care about customer service" companies is worth a few dollars more, in my opinion. $6/mo more versus $100/mo. to pay Time Warner? Easy and painless decision.  I think Netflix is a smart business and I will continue to support it as a happy customer.

  • Jen Von Ev

    Ended my Netflix this morning.  With the limited streaming options, the not-in-stock DVD's or backordered DVD's, either option forced on their customers is a lose-lose.  Guess they're going for a specific niche in the market: people that live far from cities that have brick and mortar rental places, and folks that don't want HBO, Showtime, or Hulu.

  • Eric B

    I plan to drop the DVD plan ASAP.  I can't watch them fast enough to make them worth while.

  • Bob Daniel

    When I signed up earlier this year, the $7.99 "unlimited streaming" provided, as DavidTornado pointed out, unlimited streaming of only very old or poorly rated content. There's no mention in the article about whether this is changing or subscribers are still stuck with it. I let my subscription go because of this. If I can get streaming for $7.99 AND access to ALL streaming content available (including the good stuff), I'd re-subscribe.

  • Samuel Campbell II

    Why not make the entire catalog stream-able and charge me 12 bucks?  That would be the wisest solution.  But forcing us to do one or the other will cause most of us to drop Netflix's limited selection and go to a competitor for streaming and to RedBox for immediate DVD's.  Since I only watch one DVD every 2 or 3 weeks. That would be 2-3 extra dollars a month and I don't have to wait for DVD's to come in the mail. They could also change the DVD service to one where we have to request for a DVD to be sent rather than the instant replacement option.  Right now, when I get a DVD, it sits for weeks until I am ready to watch it.  And in some instances, I go over a month before I watch the DVD.  Overall, I say that they make all their catalog accessible online and charge a couple of dollars for that.  Then they can continue the streaming for the clients who have limited or poor internet.

  • Thomas Robertson

    The article doesn't difine "use". If "use" is all inclusive (streaming & DVD), then their business model is yielding $12 everytime someone streams, as well as everytime someone orders a DVD. If so, I would say this is a significant improvement, not a "drop" in revenue. We all know their cost to stream is pennies compared to the DVD option. On the other hand, if "use" only refers to DVDs, then they have good reason to raise the price. I'm undecided on what I will do, but I would be interested in an answer to this question.

  • statichead

    Jesus, y'all are a whiny bunch. Waaaaa, now I'll have to pay a whole $16 a month to watch as much streaming content as I want, and to rent as many DVDs as I can (granted, only one at a time – oh, the horror!). And Kel, you would've just kept cable? Please. Just how much did your cable cost you a month? I'm fairly certain it was significantly more than $15.98.

  • Jstthefacts

    Yes, it may be "watch as much streaming content as I want" however, its not new releases  or hot releases. That still requires a DVD to be sent to your house. Netflix on demand material has grown greatly, but it still is limited in the delivery of premium movies. 

    As for the increase price point -- they have lost me as a customer. For the same $15 I can add every movie channel to my cable lineup, including the on-demand they provide.

  • DavidTornado

    The problem is this: unless you are interested in watching The Office (or less than two-star films) the streaming only option is a fail. If Netflix considers themselves primarily a "streaming company" they better start offering their full DVD catalog. I, for one, will be canceling my subscription.

  • Kel Hahn

    Because there is so much streamable content for my kids, I may switch to stream only, but I am ticked. The streaming library is still pretty limited and TV shows I watch such as House and Justified have only been available via DVD. Now I can't get them and keep the streaming content unless I want to pay a ridiculous price. Had I known this was going to happen, I would've just kept cable.

  • Nikki Nadeau

    I agree. Raising your prices is one thing, but forcing your customers to choose is another.  I'll be dropping them all together.

  • lifeowner

    There is, of course, a fourth alternative–drop Netflix altogether. Since I am not completely addicted to movies, I plan on choosing this option if for no other reason than to send a protest to Netflix for this huge price increase. It's summer, and I find myself having limited time to watch movies anyway. I can always subscribe again later with no penalty since they didn't give current loyal subscribers a price break.

  • Ivan J.

    I agree. I'll drop them altogether at the end of August in protest because as I see it, they neither offer a price break nor did they grandfather the current subscribers into their existing [cheaper] plan.

    I don't buy the whole Netflix is essentially a streaming business because although they'd like to be, they were not and are still are not.

    My message to Netflix, in case they're listening, is to embrace their loyal customers by giving them what they want. That's how they were able to take down Blockbuster. Instead, this move has them acting more like Blockbuster than ever and the new guy redbox (and coincidentally, Blockbuster Express) are ready to take on the new business.

    I honestly think Netflix can fix this. I just hope they do... and fast before the damage becomes irreparable.

    ---Ivan