By Kelli B. Grant
It’s time to reassess your movie rental options.
Netflix users who use the service to watch DVDs and stream video will pay an extra $72 per year starting in September, according to an announcement on the company’s blog today. That additional $6 per month stems from the site’s new policy to split DVD rentals and unlimited streaming into two separate plans. Instead of $9.99 for both unlimited streaming and unlimited one-at-a-time DVD rentals, subscribers will pay $7.99 per month for the DVD portion (more if they want to have multiple DVDs out at one time) and another $7.99 for the streaming. Even people who don’t watch streaming video and DVDs could end up paying that higher rate — Netflix has yet to email subscribers about the change, and the new plans kick in September 1. Consumers who don’t change their account to eliminate one component will end up paying for both plans. Prices are effective immediately for new members and subscribers who change their plan.
Adding salt to the wound, Netflix presented the changes as “our lowest prices ever for unlimited DVDs.” Though its claim is technically true — $7.99 is less than $9.99 — consumers are getting less for their money. Later in the announcement, the company says in its most recent plans DVDs by mail “was treated as a $2 add on to our unlimited streaming plan.” By that measure, DVDs are now quadruple the price. Netflix did not respond to requests for comment. Michael Pachter, an analyst for equity research firm Wedbush, said the move was likely done to cover the cost of adding more movies and TV shows, but that Netflix would have benefited more from simply raising prices. “The hybrid plans don’t make any sense,” he says. Many consumers will likely just rent their DVDs from another source, losing Netflix not just that extra $72 but also the $24 it was getting when DVD/streaming plans cost $9.99.
Consumers’ best recourse is to go elsewhere for DVD rentals, says Dan Rayburn, a principal analyst with Frost & Sullivan. “Netflix is basically forcing consumers to decide, do you want DVDs?” he says. Redbox and Blockbuster On Demand kiosks charge as little as $1 per night for new releases, letting someone rent up to seven DVDs a month and still come out ahead of Netflix pricing. Movies are available sooner at the kiosk, too, since Netflix has 28-day delays on many titles under studio agreements.
On the streaming side, you may not need Netflix much, either. Cable companies such as Comcast have developed free streaming sites that anyone can access, but with more shows and movies for cable customers, and there’s also $8-per-month Hulu Plus for those who have cut the cord. Amazon has been growing its on demand video selection, too, fueled by free access to shoppers who pay $79 a year for free shipping through Amazon Prime. They’re likely to keep prices low, because video on demand isn’t their sole business, Rayburn says.
Update: This post has been updated to include a comment from Michael Pachter.