Saturday, October 11, 2008
By Erik Gruenwedel | Posted: 08 Oct 2008
Online DVD rental pioneer Netflix Oct. 8 said it would begin charging subscribers an additional $1 monthly charge for unlimited access to Blu-ray titles.
Reed Hastings, co-founder and CEO of Los Gatos, Calif.-based Netflix, said in previous financial calls he wanted raise rental rates for Blu-ray, which he considered a premium product.
The company said Blu-ray represents less than 5% of its rental revenue.
Subscribers not interested in Blu-ray must opt out in order to avoid the surcharge, the company indicated in an e-mail.
Netflix continues to not charge a premium to subscribers for its streaming service and has no plans to do so despite recently adding ‘A’-list titles and TV programming via content distribution deals with Starz, CBS and ABC TV.
Edward Woo, media analyst with Wedbush Morgan Securities in Los Angeles, said the price hike for Blu-ray is intended to increase incremental revenue and offset the format’s higher wholesale cost.
Woo said Netflix thus far has not charged for its streaming service, whose costs (read: postage) and market penetration he said are lower than DVD by mail.
“My guess is that when it becomes widely developed, you may see a price increase for streaming,” Woo said.