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Netflix Testing $5.99 Plan

15 Feb, 2006 By: Holly J. Wagner

Netflix is testing a $5.99 subscription plan that caps monthly rentals at three discs, a spokesperson has confirmed.

CEO Reed Hastings said in a Jan. 24 financial call that Netflix is doing “tightly controlled tests” of suggesting that lower-usage customers downgrade, as well as pricing tests. He also said usage has decreased as more subscribers are drawn to the $9.99 two-out-at-a-time plan. That's good for Netflix margins, if it can increase subscriptions and reduce usage.

The spokesperson confirmed the $5.99 sub test, but would not give details of how widespread it is or whether it is geographically or electronically based.

Wedbush Morgan Securities analyst Michael Pachter doubted that Netflix would ever roll the $5.99 plan out on a wide scale.

"The deal is too close to the $9.99 program, with the only real difference a limit on use per month," he said. "Most $9.99 people rent fewer than four times a month already, so there's no reason to give them a $4 discount."

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