It's not like you couldn't see this coming. With more and more customers using its "Watch Instantly" streaming feature -- and with the cost of procuring content from video and movie producers rising -- Netflix on Tuesday announced it would raise its rates and offer separate DVD and streaming packages. Wall Street reaction was muted, with shares of Netflix (NASDAQ: NFLX) rising 53 cents, or 0.2 percent, to 291.27 in Tuesday's trading. The company's stock hit an all-time high of 301.50 Monday before pulling back to close at 290.74.
Here's how Netflix lays out the changes:
With this change, Netflix will no longer be offering unlimited plans that include both streaming and DVDs by mail. The unlimited streaming plan will remain at $7.99 a month. The price for getting both unlimited streaming and unlimited DVDs will be $15.98 a month ($7.99 + $7.99).For new Netflix members, the changes will be effective immediately. For existing members, the new pricing will start for charges on or after September 1.
In a statement accompanying the announcement, Netflix Chief Service and Operations Officer Andy Rendich said, "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." Netflix was founded in 1997, but didn't start offering streaming video to its DVD-by-mail customers until 2007. Investors have expressed concern over the past year that Netflix's margins would suffer as it was forced to spend more for content and as other companies such as Facebook and Amazon.com got into streaming video.