Subscribers who want everything Netflix (NSDQ: NFLX) has to offer will be paying more for it. Netflix no longer will offer a plan that includes streaming and DVD. Instead, subscribers will have to choose or pay for two plans. Unlimited online streaming stays at $7.99; the DVD-only monthly fees range from $7.99 (1 at a time) to $11.99 (2 at a time). Want a DVD and streaming? No discount; it’s simply double or $15.98. That’s a 60 percent hike — and a reason some people already are giving for reconsidering their Netflix allegiance.
The switch takes effect immediately for new subs but existing subs get current pricing until Sept. 1. It’s the second major change in less than a year. It also follows the loss of some high-profile content for Netflix while Starz and Sony (NYSE: SNE) work out a contract issue. That plus the considerably smaller amount of content available for instant streaming makes the DVD option more important for those that like to swing both ways.
Here’s how Jessie Becker explains it on the handy-dandy Netflix blog:
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.
Why the changes?
As popular as watching via streaming has become, Netflix was unprepared for how much people still like DVDs — and for the costs that go with it. Offering DVDs as a $2 add-on to the streaming plan turned out to be a bigger financial hit.
Becker puts it this way:
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.
Put another way, Netflix isn’t going out of the DVD business any time soon and it can’t afford to act like it is.