Netflix raises prices for some subscription plans
LOS GATOS, Calif. - Netflix Inc. is raising the prices of some of its subscription plans and is shifting its focus to streaming video as more members move to the Internet to watch movies and television shows. Its shares surged more than 7 percent in trading Monday.
With high-speed online access now becoming a household staple and various gadgets making it easier to connect high-definition TVs to the Web, Netflix is realizing it needs to evolve as Internet streaming goes mainstream.
The company based in Los Gatos, Calif. previously announced that more of its members are watching more content streamed over the Internet than on DVDs. To deal with this shift, Netflix says it will spend more this quarter to license streaming content than to buy DVDs.
Netflix said Monday that its subscription plan for unlimited movies and TV shows streamed over the Internet and unlimited DVD deliveries ,with one DVD out at a time, will increase by $1 a month to $9.99. Prices for other plans allowing for more DVDs out at a time are also going up.
Existing members will incur the price increases in January, while people who are new sign-ups will face the higher prices immediately. Netflix has more than 16 million members in the U.S. and Canada and predicted in October that it would gain another 2.1 million to 2.9 million customers by year's end. That means Netflix could enter 2011 with more than 19 million subscribers, doubling the service's size in two years.
Netflix is also launching a $7.99 a month streaming-only plan in the U.S. to accommodate the online shift. It already has a streaming service in Canada for a monthly fee of 7.99 Canadian dollars ($7.86).
"We are now primarily a streaming video company," co-founder and CEO Reed Hastings said in a statement.
Netflix is spending heavily to obtain the streaming rights to more movies and TV shows to help lure more customers and shift more of its existing subscribers away from DVDs.
In the third quarter, Netflix spent $115 million on video streaming rights, up from just $10 million at the same time last year. Spending on DVDs dropped 35 percent from a year ago to just under $30 million in the third quarter.
Netflix shares jumped $12.74, or 7.4 percent, to $185.78 in morning trading. Over the last year, the stock has traded in a range of $48.52 to $184.74.