- Associated Press - Tuesday, July 12, 2011

SAN FRANCISCO — Netflix is raising its prices by as much as 60 percent for millions of subscribers who want to rent DVDs by mail and watch video on the Internet.

The company is separating the two options so that subscribers who want both will have to buy separate plans totaling at least $16 per month. Netflix Inc. had been bundling both options in a single package, available for as low as $10 per month.

New subscribers will have to pay the new prices immediately. The changes take effect Sept. 1 for Netflix’s current customers.

Netflix isn’t changing the $8 monthly price for an Internet streaming-only option, which the company began offering late last year. But instead of charging $2 more for a plan that also offers one DVD at a time by mail, the company will charge $8 for a comparable DVD-only plan. That brings the total to $16.


Those who want to rent up to two DVDs of a time with streaming will pay $20 per month, or 33 percent more. Those wanting three DVDs at a time with streaming will pay $24 per month, or 20 percent more.

When Netflix unveiled the streaming-only option, it also raised the rates for its most popular DVD rental plans by $1 to $3 per month. Those plans included unlimited online streaming too, as had been the case since Netflix began sending video over high-speed Internet connections in 2007. That means longtime subscribers who want both entertainment options will get their second price increase in eight months.

Netflix’s willingness to risk alienating subscribers signals that it needs to bring in more money to cover its rising costs.

The company’s earnings would likely be squeezed if it continued to cover the overhead for buying and shipping the discs while also spending heavily to license more video for its streaming library. In the first three months of this year, Netflix spent $192 million on streaming rights after pouring $406 million into the library last year.

Jessie Becker, Netflix’s vice president of marketing, wrote Tuesday on Netflix’s blog that charging just $2 more for a bundled plan “neither makes great financial sense nor satisfies people who just want DVDs.”

On the flip side, Netflix customers who haven’t embraced Internet streaming will be getting a price break. They can now subscribe to a DVD-only plan for just $8 per month for one DVD at a time, a 20 percent reduction from the current package that included streaming.

Netflix, which is based in Los Gatos, Calif., has never said how many subscribers get the streaming-only options, but most households prefer getting both because each has its advantages.

Investors seemed to welcome the higher prices in stride. Netflix’s stock rose 53 cents to close Tuesday at $291.27.