In yet another move to change their business from a DVD-by-mail one, US based Netflix Inc will offer its first unlimited stream-only plan in the US, which will be available immediately. The company also announced it will increase prices for some of its DVD and streaming plans.
The company has been working for a while to move away from the DVD-by-mail, as DVD has a short shelf-life, while streaming shows possibility for higher profits, according to Brett Harriss, an analyst with Gabelli&Company.
New clients will pay the higher prices immediately, while current subscribers will see higher charges on Netflix services in January.
Analyst Michael Pachter of Wedbush Securities said that the company’s current fee plan might turn many away, as Netflix increased the prices for lending one and two DVDs by one dollar, while the 3-DVD plan will now cost 19.99 dollars, more expensive by three dollars. Streaming subscription will cost 7.99 dollars per month. He added that the gains from streaming subscriptions might be counterbalanced by those who will quit the company because of the price increase. The company shares posted a 7.7 percent increase on Nasdaq, to 186.44 dollars per share, on Monday, and Pachter believes that the company’s new plans might not have the estimated success.
Netflix launched its first streaming-only subscription service in Canada, in September. The company ended the third quarter of 2010 with almost 17 million clients in the US and Canada. The company also reported a decrease in gross profits, from 39.4 percent in the second quarter to 37.7 percent. The company’s CEO Reed Hastings said that Netflix wants to keep gross profits for the long term within the range of 30-35 percent.
At the end of October the company’s revenue expectations for the fourth quarter were between 586 million dollars and 598 million dollars.
