Mo' Blu-rays, Mo' Money … Mo' Problems?

The DVD format is starting to show its age, so Netflix (Nasdaq: NFLX  ) is moving on up to fancier formats. But a better picture ain't free no more -- and it's getting more expensive.

The movie-rental pioneer just told its 700,000 Blu-ray fans that the fees they pay will go up soon. On April 27, the current flat fee of $1 per month for access to Blu-ray titles becomes a sliding scale. The cheapest one-disc plan keeps the $1 Blu-ray premium, while the priciest eight-disc option tacks on $9 for that privilege.

Blu-ray movies typically cost about 30% more than the same content packaged on a plain old DVD, so it makes sense for Netflix to try covering its costs a little bit. A few subscribers may opt out of the new charges, but I suspect that most of 'em will stick around.

You might remember a hue and cry about the original $1 fee and the low availability of those pricey titles. But Netflix keeps growing its Blu-ray subscriber base regardless, so a lot of those customers might not be too price-sensitive. And there are other ways to cover that extra expense that would actually benefit Netflix overall: The seven-disc plan plus $1 Blu-ray surcharge comes out to $42.99 today. After the price change if you drop down to six movies out at a time plus the $7 Blu-ray charge, the price stays the same. And you can get some fresh air where that seventh movie would have shown up. Sheesh. Netflix likes the lower-priced, fewer-disc plans because you get a volume discount on the heftier alternatives.

In the grand scheme of things, I see Sony's (NYSE: SNE  ) Blu-ray format as a stopgap between DVDs and online streaming. Since many Blu-ray players happen to include networking capabilities, they may end up playing more online video streams than plastic discs before long.

You can tell by the name that Netflix always wanted to be a purely online service, and that day is approaching. The competition will be tough from other digital-media mavens such as TiVo (Nasdaq: TIVO  ) , Apple (Nasdaq: AAPL  ) , and Amazon.com (Nasdaq: AMZN  ) -- and perhaps Blockbuster (NYSE: BBI  ) can carve out a little niche somewhere, too. But I see Netflix building an early lead, and promoting the use of Blu-ray players will play right into its online ambitions.

Further flixy Foolishness:

Apple, Amazon.com, and Netflix are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Anders Bylund owns shares in Netflix, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (6) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 31, 2009, at 4:32 PM, timswim wrote:

    Actually, he's wrong. After 4 years of commitment, I left Netflix. I could understand a doubling of the charge but increasing 4-fold is ridiculous. I terminted my account and signed up for Blockbuster which does not charge extra for Blu-Ray. I hate Blockbuster, but I hate price gouging more. If BB starts charging, I will likely come back. Until then, Netflix can eat me!!!

  • Report this Comment On March 31, 2009, at 6:01 PM, bluestarmom wrote:

    TMF Zahrim is wrong. As a subscriber, I received an email that my one-disc at a time subscription with $1 extra per month for blu-ray would be changed to $2 per month. So I don't know where your info came from, but that scale just slid up for me. In fact, it was prorated because I was charged $1.07 the last time!

    The extra $1 isn't really of importance to me but when those blu-ray discs come down in price, I will expect them to take it off. And I wonder why they did not properly price it to begin with? Was it a tease to get folks to sign up? If so, that says more to me about the company than the price increase.

  • Report this Comment On March 31, 2009, at 8:02 PM, TMFZahrim wrote:

    bluestarmom, you are on the 1 out unlimited plan, then, which gets the $2 surcharge. It's the 1-out, 2 movies per month plan that stays at $1 extra for a grand total of $5.99.

    Anders

  • Report this Comment On March 31, 2009, at 8:13 PM, ericnix1 wrote:

    Had to cancel my account. Not going to pay that much for Blu-ray access. A poor economy, warmer summer months ahead for playtime outdoors, and Netflix increases its fees. Yep, definitely a cancelation. I urge everyone to forward their cancelation emails to Netflix's CEO.

  • Report this Comment On March 31, 2009, at 8:52 PM, tunahead08 wrote:

    I've been a Netflix member for 5 years, canceled my account today after I received the price gouge email. A company like Netflix should have had it priced properly in the first place, instead they pulled the 'ol bait and switch on us. A $1 increase I would have been alright with, but $3 is just dumb especially with the long waits that I had on the Blu-Ray movies. Going to try Blockbuster online and see how that is.

  • Report this Comment On April 01, 2009, at 10:37 AM, crankyT wrote:

    I too made a change. I dropped down to the 2 disc a month plan and kept Blu for the new rate of $16.99. But actually, I might just cancel altogether.

    It is changes like these that make us think "Do I really need to spend $17 bucks a month for movie rentals when a $1 RedBox can keep me up with current releases?"

    The three disc plan seemed like a better deal to me than what I will get with the 2 disc plan and this change may be the end of Netflix for me.

Add your comment.

DocumentId: 864650, ~/Articles/ArticleHandler.aspx, 4/17/2014 12:32:57 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement