Netflix hopes you weren’t using both its DVD-by-mail and instant streaming options for the low, low price of just $10 per month.
Come September, you’ll have to opt for an $8 streaming plan or an $8 DVD plan—if you want both, you’ll have to pay for both. If my math is to be trusted, that’s $16 per month. For members new to Netflix, the price changes take effect immediately.
Netflix rolled out an $8 per month streaming-only plan back in late November of last year and bumped its one DVD per month plan from $9 up to $10—that plan included streaming content as well, though. As recently as April of this year, Netflix foreshadowed that the licensing fees required to secure the rights to streaming content would “increase substantially.”
And while the amount of postage Netflix spends on sending DVDs out in the mail far outweighs the cost of streaming movies online, consumer demand for streaming content seems to have resulted in increased licensing costs—an estimated $700 million this year and a whopping $1.2 billion next year.
Netflix COO Andy Rendich attempts to spin the new pricing structure positively, saying, “Netflix members love watching instantly, but we’ve come to recognize there is still a very large continuing demand for DVDs by mail. By better reflecting the underlying costs and offering our lowest prices ever for unlimited DVD, we hope to provide a great value to our current and future DVD-by-mail members.”
The company further explains the pricing changes on its blog:
“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. 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. Creating an unlimited DVDs by mail plan (no streaming) at our lowest price ever, $7.99, does make sense and will ensure a long life for our DVDs by mail offering. Reflecting our confidence that DVDs by mail is a long-term business for us, we are also establishing a separate and distinct management team solely focused on DVDs by mail, led by Andy Rendich, our Chief Service and Operations Officer and an 11 year veteran of Netflix.”
The new DVD-by-mail plan represents a price decrease of $2 per month, which won’t draw any heat from current DVD subscribers. And the streaming-only plan has remained the same, which won’t draw any heat from current streaming-only subscribers.
That leaves those who were paying $10 per month for both the DVD-by-mail features and the streaming features—a cross section of consumers that’s perhaps small enough that Netflix doesn’t think it’ll face too much backlash over a $6 per month price increase. Some in this group may now find themselves having to choose between physical media and internet-based streaming, though, and not all DVD titles are available for streaming, either.
It’ll be interesting to see whether the company decides to increase the costs for the streaming-only plans down the line, too. If licensing fees indeed increase to $1.2 billion next year, Netflix may either have to add a whole lot of new subscribers, raise streaming prices, or both.