Netflix is challenging territory that one influential analyst calls unprecedented -- raising the price for unlimited streaming and DVD's by 60 percent per month.
The Internet video services company, with more than 23 million subscribers, has been offering unlimited streaming and unlimited DVD's (provided just one is taken out at a time) for $9.99. But now Netflix is raising the price 60 percent to $15.98 per month.
However, Netflix will also split the difference, allowing subscribers to get unlimited streaming for $7.99 per month and unlimited DVD's (with just one taken out at a time) for $7.99 per month.
Netflix will also offer subscribers a two-out-at-a-time DVD option at $11.99 per month.
By offering our lowest prices ever, we hope to provide great value to our current and future DVD's by mail members, a Netflix executive said in a blog post Monday.
Analyst Tony Wible told clients Tuesday before Netflix made the announcement as rumors swirled of a Netflix price hike of 50 percent or more that such a move is a sign that the Internet video services company is having to spend more for content rights and subscriber acquisition costs amid tougher market competition.
An increase of that size is unprecedented, Wible said. He has a sell recommendation on Netflix (NASDAQ: NFLX), but the stock was trading up Tuesday on news of the 60 percent price hike, advancing 89 cents a share to $291.83, just $10 short of a 52-week high.
The pricing change will take place immediately for new Netflix subscribers and in September for current Netflix subscribers, giving them more than a month to make any desired changes to services.
We are separating unlimited DVD's by mail and unlimited streaming into separate plans to better reflect the costs of each and to give our members a choice: a streaming plan only, a DVD only plan or the option to subscribe to both, wrote Netflix Vice President of Marketing Jessie Becker, in a company blog post.
In June Sony movies were pulled from Netflix's online streaming service because of a temporary contract issue. Netflix is facing increasing costs for the material it distributes, and the price hike is viewed in response to that.
But Netflix has been on a roll as of late. The Internet video company recently expanded into Canada, and last week the company announced it will begin offering streaming video services to Latin America and the Caribbean.
Founded in 1997, the Los Gatos, California-based company (NASDAQ: NFLX) Netflix reported in April its first-quarter profit soared 87 percent on a revenue jump of 46 percent.