Wednesday, July 13, 2011

Netflix Boosts Its Rates to Cover Rising Costs

Netflix raises mail, Internet video rates. (Boston Globe, 7/13/2011)

Excerpt: When Netflix unveiled the streaming-only option, it also raised the rates for its most popular DVD rental plans by $1 to $3 per month. Those plans included unlimited online streaming, as had been the case since Netflix began sending video over high-speed Internet in 2007. That means longtime subscribers who want both entertainment options will get their second price increase in eight months.

Netflix’s willingness to risk alienating subscribers signals that it needs to bring in more money to cover its rising costs.

The company’s earnings would probably be squeezed if it continued to cover the overhead for buying and shipping the discs while also spending heavily to license more video for its streaming library. In the first three months of this year, Netflix spent $192 million on streaming rights after pouring $406 million into the library last year.

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