Netflix Raising Prices

Cable providers likely to be pleased with announcement

The cable world must be rejoicing: Netflix is raising its prices.

In a post to the company blog earlier today, the video rental service announced plans to rearrange its billing scheme. The company is doing away with a current plan that allows customers to rent one DVD at a time and gain access to unlimited streaming movies  for $9.99 per month. Henceforth, those services will be divided up—$7.99 per month to stream movies and $7.99 to rent DVD’s by mail one at a time. For access to both DVD rentals and streaming movies, Netflix customers will now have to pay $15.98 a month.  The changes will be effective immediately for new Netflix customers and will go in to effect on September 1 for existing subscribers.

“We have realized that there is still a very large continuing demand for DVDs both from our existing members as well as nonmembers,” Netflix’s blog announcement read. “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.”

The Netflix price point has been a source of grumbling among television executives for months. At the Cable Show in Chicago in June, Michael Willner, the CEO of cable provider Insight Communications, took the opportunity of a public panel discussion to complain about Netflix’s low subscription costs. “Cheapness and what we’re providing don’t necessarily go hand in hand,” Willner said at the time. “Netflix is probably the best example of an application that requires a ‘fat’ [broadband] pipe . . . If they want to compete, Netflix will have to charge prices that are comparable to our services.”

Willner’s dream of a Netflix pricing scheme on par with what the cable world charges hasn’t exactly materialized just yet, but today’s reorganization is certainly a nod to it.