July 12 (Bloomberg) -- Netflix Inc., the online and mail-order movie rental company, raised prices by 60 percent for U.S. subscribers who want both services, citing the costs to acquire and deliver films and TV shows.
Netflix will no longer offer a $9.99 package of DVD-by-mail and unlimited streaming, the company said in a statement today. Instead, more than 23 million subscribers will pay $15.98 monthly beginning Sept. 1 if they choose both options, or $7.99 for just one.
The company introduced a DVD-only plan for $7.99 on July 8 for new subscribers and extended that to current customers to reflect the costs of acquiring and delivering content digitally and by mail, Steve Swasey, a Netflix spokesman, said in an interview. Many customers want the option of streaming-only or DVD-only packages, he said.
“We wouldn’t have charged this when the streaming catalog was still lean,” Swasey said. “The streaming catalog is robust to the point where a lot of people won’t want DVDs anymore.”
Netflix, based in Los Gatos, California, needs to boost revenue to raise funds for expansion and the acquisition of new content, Tony Wible, an analyst with Janney Montgomery Scott LLC, said recently in an interview. He has a “sell” rating on the shares.
Since 2007, Chief Executive Officer Reed Hastings has increasingly focused on delivering movies and television shows via the Web to televisions, set-top boxes and mobile devices.
The company, after instituting a November price hike, discovered subscribers still want DVDs by mail, according to a blog posting. It is creating a separate unit, run by Andy Rendich, chief service and operating officer, to handle the mail-order side of the business.
“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,” Netflix said in the posting.
The company plans to expand its streaming-only service to all 43 countries and territories in Latin America and the Caribbean later this year. As of March 31, 97 percent of its customers were located in the U.S., according to data compiled by Bloomberg.
Netflix rose 53 cents to $291.27 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have gained 66 percent this year.
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