Netflix Increases Subscription Prices…And They Can!

Looks likes Netflix (NASDAQ:NFLX) is herding its customers to go streaming only as it just raised prices substantially on combo plans.  It will be interesting if there is any backlash…however customers have limited alternate choices out there. (Coinstar I suppose). Netflix: In Depth Financial Analysis Post Strategy Shift>>

This will be a positive for profits as long as there are no large scale defections.  It is estimated in a Bloomberg report that these combo plans represent 80% of the current user base.  (current price for the combo plan is $9.99 so anyone who does not change by Sept 1 is going to see a 60% price increase)  Fourth quarter revenue could see a very big spike as some people will be too lazy to make a switch, until it begins to hit them in the pocketbook.

Via Marketwatch:

  • Netflix said Tuesday that it would no longer offer unlimited plans that include both streaming and DVDs by mail. Users must now either subscribe to a stream-only plan, a DVD-only plan, or a combined plan.
  • The unlimited streaming plan will remain at $7.99 a month.
  • The price for obtaining both unlimited streaming and unlimited DVDs will be $15.98 a month ($7.99 + $7.99).
  • For new Netflix members, the changes will be effective immediately. For existing members, the new pricing will start for charges on or after September 1.
  • Netflix founder and Chief Executive Reed Hastings has said for some time that the DVD market would exist for at least another decade. Not every title available on DVD or Blu-ray is yet available for streaming, particularly older library titles of a type preferred by many of Netflix’s core customers.
This is a guest post written by Trader Mark who runs the blog Fund My Mutual Fund