Netflix launches streaming-only movie service, raises prices for DVD plans

Making a big bet on a digital future, Netflix on Monday debuted its long-anticipated Internet streaming-only service while also raising rates for its plans that include DVDs.

The fast-growing movie rental company will allow members to watch video from its library of content that can be streamed online to computers or Internet-connected televisions. Chief Executive Reed Hastings said last month that it was likely the company would launch such a plan this year.

The convenience of the all-digital option comes with a major caveat: Netflix's streaming-content library is much smaller than what is available via the mail because it's governed by a byzantine set of licensing deals. Three of the six major Hollywood studios will not offer movies through Netflix's streaming service until they are done airing on HBO -- typically at least seven years after they are released on DVD.

Nonetheless, demand for Netflix streaming has quickly grown to the point at which it now delivers more movies online than it ships through the mail. The new $7.99 plan appears designed to attract a younger and more frugal audience that watches much of its content via digital media.

At the same time, prices for existing plans will go up at a rate of $1 per month for the number of movies included in the plan. Those who rent one movie at a time, for instance, will see their charge increase to $9.99 from $8.99, while those who rent three movies at a time will get a hike to $19.99 monthly from $16.99. All DVD plans include access to online streaming.

The move could continue a trend for the company of declining monthly revenue from its 16.9 million subscribers. Wedbush Morgan analyst Michael Pachter said in a research note Monday morning that many subscribers to the one-DVD-at-a-time plan already watch most of their content online and likely will switch to the new, lower-cost option.

Netflix is betting its future on digital delivery, however, and the savings it will realize from no longer paying postage. Investors seemed to like the move; the company's stock shot up 7% to $185.63 in midday trading Monday after the announcement.

-- Ben Fritz

Comments

[k]

I intend to continue with my DVD rental from Netflix instead of that streaming business. See, I have a 46" HD flatscreen TV and I'll gladly pay another buck to watch DVDs on it instead of on my puny computer screen. The only exception might be the rare movie on my "saved" list that's available by streaming only. But right now I have enough movies on my queue to postpone having to do that for quite awhile.

[Val]

If you get a Roku player you can stream the movies to your TV.

[HollywoodPR]

K, that's truly fascinating. Thanks for sharing.

[Cara D]

Time to cancel my membership. I can use the monthly fee to actually go see a movie in a theater.

[Phillip]

Wow, that’s a kick in the nads for those of us who have the capability to stream digitally but don't because THE CAPTIONS DON'T WORK! F U Netflix! I think I'll cancel my subscription.

[M]

So those of us that have to watch everything on DVD because the "technology isn't there" to enable closed captions on steaming content get punished with raised rates? Thanks, Netflix.

[jake d.]

to "k" - what is preventing you from connecting your computer to your TV and watching the movies on the large screen?

[G]

K, what you may not realize is that although you have a 46" HD flatscreen TV, your DVD's still are not HD. If you opt to pay the extra 1$ for Blu-Ray's, you can then watch your movies in HD, although the selection of Blu-Rays is much smaller than the streaming HD content, which also happens to be growing in use through Blu-Ray players which access Netflix through the internet, as well as every modern day video game console. This option alone makes the streaming only option much more attractive to younger audiences.

[Bay]

Netflix is still a bargain. I went to the movies this weekend and it was $10.25 per ticket. Assuming you routinely watch movies with a friend or significant other that’s $20.50. If you have a family it only goes up from there. For those prices I can have an entire month of movies on Netflix (DVDs and streaming) and still have money to spare. Take a look at your cable bill and then tell me Netflix is too expensive!

[Broly]

Netflix hates the deaf community!

[JenBee]

Going to the movies every once in a while is nice but it's becoming a bit expensive and in some cases I would rather watch in the comfort of my home where it's less noisy and there are no rude people to deal with.

[Asian Larry]

Phillip, what do you mean 'THE CAPTIONS DON'T WORK'?

I just signed up for Netflix two hours ago then I read this story (and comments)

[Gaucho420]

If you have a PS3, 360 or Wii, you can stream to your TV via each of these consoles.

[Phillip]

@ Asian Larry

Netflix digital feed through my xBox doesn't have closed captioning. I have to set them on the DVD or my TV will sometimes pick up the signal, but with digital streams neither work.

[David Sundqvist]

P for the piratebay! They don't wait for the movies to be showed on HBO. Piracy is freedom. Legalize.

[JM]

I'm still going to keep my one-DVD-at-a-time option. There are still a lot of movies not available for streaming. I even opt for the Blu Ray upsell because the discs truly look amazing on my 46-inch HDTV.

I stream more than I watch discs though. HD-streaming in particular looks great coming through my PS3 and WDTV. Not as good-looking as Blu Ray obviously, but much better than standard-def DVDs.

I knew Netflix was going to have to raise their prices eventually. But 3 extra bucks for the 5-6 Blu Ray discs I rent a month is a major bargain any which way you slice it.

[Jack Meoph]

hate to bum you HD streaming ppl out, but unless you have a dedicated T1, you're not getting HD quality anyway. Netflix bumping up the fees is cr@p. They have no competition and now, like cable, they will bump every year because we no longer have an option. Capitalism wins again.

[Jake]

I'm going to cancel netflix at the end of the month. It's a good service but in times like these raising prices seems wrong-headed. The blue Ray ADDITIONAL price increases is just wrong.

I'm going to try out Redbox

http://www.redbox.com/

[kd]

What a whiny bunch of cry babies. I feel like I'm back in SF reading the gate's message board. How 'bout everyone whining about netflix right now get back in their cars, drive to blockbuster, pay 3.50 for a single 48 hour rental then drive it back to the store. What a horrible inconvenience to have as many movies as you want mailed to your home for $20/ month. "netflix hates the deaf community"?! Right, they must hate the blind, too because all the movies also have visuals.

[Phillip]

Either KD works for Netflix or he/she is a knuckle dragger.

***Right, they must hate the blind, too because all the movies also have visuals. ***

That doesn't even make sense. You would imagine adding closed captioning, which by the way is very inexpensive, to appease their consumers would be a top priority but instead they raise their rate!

[Josh]

Josh - Netflix announced a new less expensive plan today for customers watching movies online only. Check it out. For a g-pa, I stay rather up to date in techy news! :)

[Bald-headed Whiny Babies]

Most of you are acting like a bunch of bald-headed whiny babies! This is some of your primary hobby is to go from blog to blog moaning about nutin' please re-join the rest of the people in your household or go outside for some fresh air!

[kelly]

you still cant stream new releases from netflix. i have the dvd plan already for 19.99, and i stream older movies. i dont see dvds going anywhere. you cant get the extra features with live streaming that you get with dvds.

[lisa]

i'll stick with my dvd plan, and if netflix wants to get crappy and get rid of dvds all together i'll just buy from dish on demand. my thing is with the live streaming many of the new movies aren't on the live streaming, and if you have a bad internet connection then you are screwed.

[Jessica Thurber]

Dear Netflix, Enough is enough: http://bit.ly/fcranW