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 Netflixs current customers.
Netflix isnt 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 at 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.
Netflixs willingness to risk alienating subscribers signals that it needs to bring in more money to cover its rising costs.
The companys 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, Netflixs vice president of marketing, wrote Tuesday on Netflixs 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 havent 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.
Internet streaming provides more immediate gratification and the convenience of getting video on mobile devices, but the selections typically dont include the latest theatrical releases. Thats where DVD rentals come in handy. Netflix cut deals with several movie studios last year to delay sending out some DVD releases for their first 28 days on sale in return for better deals on Internet streaming rights. Far more titles are available on DVD than through streaming though.
Investors seemed to welcome the higher prices in stride. Netflixs stock rose 53 cents to close Tuesday at $291.27.