Netflix announced changes to its subscription-pricing structure today, hiking the cost for unlimited streaming and DVD rentals to $15.98 per month from $9.99 per month. Existing customers will start paying the new, higher rate on Sept. 1.
Netflix's unlimited streaming-only plan will remain $7.99 a month. The company also introduced two DVD-only plans: $7.99 a month to have one DVD out at a time and $11.99 to have two.
"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," Jessie Becker, VP-marketing, said on Netflix's corporate blog. "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."
The changes also illustrate Netflix's continued investment in its streaming service, which has helped the company's subscribers grow from 6 million in 2007 (when it introduced streaming) to more than 23 million today. Netflix finished the first quarter with more subscribers than Comcast -- 23.6 million for Netflix vs. 22 .8 million for Comcast -- effectively making it the largest video-subscription service in the U.S.
But other streaming subscription services are hot on Netflix's tail. Hulu CEO Jason Kilar said last week that Hulu Plus , the site's $7.99-a-month subscription service, has added 875,000 subscribers since its November 2010 launch -- and just more than a million if you count its free-one-week-trial customers. And Facebook today announced a new deal with BBC Worldwide to rent episodes of "Doctor Who" in exchange for Facebook "credits," a continuation of an entertainment rental strategy that began in March with Warner Bros.' "The Dark Knight ."
The Netflix price hikes are also evidence of the increasingly steep costs Netflix is shelling out to ink streaming contracts with studios. Last month, Sony Pictures suspended streaming of many of its movies through StarzPlay, the result of heated contract negotiations for a larger deal with Starz Entertainment. BTIG analyst Richard Greenfield estimated that the new agreement between Starz, Sony and Netflix would likely be worth $300 million to $350 million annually, a substantial increase from what was previously estimated by some analysts to be worth only $30 million a year.