Los Gatos (CA) - Netflix subscribers will soon need to start paying a "modest monthly premium" if they want to rent Blu-ray Discs, even though over the past two years high-def movies have been included in the standard rates.

The online rental leader made the announcement in its latest quarterly earnings conference call, and came alongside news that Netflix was lowering its earnings forecast for the rest of the year.

The company's CEO Reed Hastings said that increased competition from Blockbuster and a greater interest in digital video downloads have hurt profitability more than expected.

Netflix does offer its own online streaming platform, but its business model is built with a much higher focus on its physical DVD and Blu-ray distribution.

As a small way to curb the expected slip in profit margin, Hastings said the ability to rent Blu-ray Discs from Netflix will be an added feature that tacks on an undisclosed rate to monthly subscription fees.  Marketwatch quoted Hastings justifying the move by saying, "Consumers are used to paying more for high definition content."

Current subscription rates range from around $5 to $17 per month, with the fee varying based mainly on how many DVDs users are allowed to have rented out at the same time.

Adding a premium to users who want to rent Blu-ray Discs will additionally allow Netflix to bulk up its BD inventory, said the rental service.

Hastings also noted that of all current Netflix subscribers, the amount that are renting Blu-ray Discs is "in the low single digits."

Blu-ray knocked out HD DVD earlier this year, causing all facets of the industry to merge to the high-def market. It has negatively affected consumers in some ways, though. In addition to Netflix's pending rate hike, Blu-ray player prices have shot up without the HD DVD competition.

Damn

Apr 22, 2008 11:52     

Since blu-ray win all prices are going up first the stand alone player and now rental I think that they should learn that a lot of people doesn't have that much money to waste.
Vito report abuse vote down vote up Votes: +0

Another fine example

Apr 22, 2008 11:57     

Another fine example for you Blu-ray fanboys. No competition means prices go up.
T report abuse vote down vote up Votes: +8

Interest in digital downloads??

Apr 22, 2008 12:38     

"greater interest in digital video downloads have to me hurt profitability more than expected" How the heck does "interest" hurt the rental business? I don't know anyone who does digital downloads yet. Sounds like a canned response to me
J. Doe report abuse vote down vote up Votes: +2

So so example

Apr 22, 2008 13:00     

This is one arena in which I don't want competition. Product competition is great & needed. Competing formats can often be detrimental .. key example here.
J report abuse vote down vote up Votes: -1

@JDoe

Apr 22, 2008 13:32     

There's more and more momentum for the download/on demand services. Netflix' own on demand service works great as long as you're on the left coast, but I know folks back east that have said its a dog. Anyway, I'm not complaining about any rate increase as long as its less than 2 dollars. It's still a lot cheaper than per movie rental. (I figure I'm paying about 1.50 a movie for netflix). I wonder if the increase is related in anyway to more damage on blu-ray discs? I haven't heard of anything related to that, just curious if there's some other factor at play.

Jim L report abuse vote down vote up Votes: +0

Digital Downloads

Apr 22, 2008 14:27     

I haven't rented a movie in 3 years now that wasn't through digital distribution. Same goes with purchasing music and PC games.
burn report abuse vote down vote up Votes: +0

sigh

Apr 22, 2008 15:09     

I knew this was coming I just didn't want it to happen so soon!!! Hey Netflix can I get a BD refund the next time you take a week and a half to send me a BD movie??? I have a queue all BD and it takes a week and a half to get me 1 MOVIE!!!.
Action Jackson report abuse vote down vote up Votes: +0

It was only a matter of time.

Apr 22, 2008 20:37     

This is where I get to say "I told you so!" HA!
Narg report abuse vote down vote up Votes: +0

Re: It was only a matter of time?

Apr 23, 2008 00:00     

Told us what? ...That no PS2 has ever been able to play DVDs in progressive? ...That Sony lied about scratch resistant coatings on BD discs? ...Or that we could bank on HD-DVD becoming the undenied choice within the next 12 months? I don't recall you having any insight into Netflix's cost structure leading up to this announcement.
Fredo report abuse vote down vote up Votes: +2

RE:Another fine example

Apr 23, 2008 02:53     

The format war is totally irrelevant to Netflix raising their prices for HD media. The studios most likely charge Netflix more for one BD rental license than an equivalent DVD license. And contrary to your ignorance, a format war does NOT create lower prices in the long term. With two formats existing, mainstream adoption NEVER happens which doesn't allow for economies of scale to make it cheaper for everyone and prices never come down. How can so many morons not understand this? Or is it just bitterness from your loss? ---------------------------------------------------- Another article from Mark Raby, the In-house HD-DVD fanboy. Just had to throw that last shot in at Blu-ray, huh? Just can't stand to think that you supported the wrong format, huh?

loosely_coupled report abuse vote down vote up Votes: +1

bitter HD fanboy

Apr 23, 2008 11:18     

netflix has to raise price because their cost for each movie is higher..HD or blue ray. format war, keep buyer away so both formats will eventually both died. Tom's articles were looking at short term sales price since march when HD dies. it's only been 1 month since HD dies...blue ray is not going to price drop that fast. however, with new model comes out in coming months, old players will drop price due to getting more outdated. more disc sales also will start to get the no-name brand players into the market and the name brands will cut price to compete. just wait till next year....the price will drop one way or the other. As for netflix, I don't mind paying more for BD or DVD disc, but they better take off that stupid "Delay" formula when you rent too often. I want my disc NOW and I don't care about rental price as long as it's cheaper than buying.

ha report abuse vote down vote up Votes: +0

Profits Down?

Apr 25, 2008 12:49     

Profits are down because it costs a fortune to ship and replace all those damaged DVDs. About 15% of the NetFlix DVDs we get are unplayable. Another 15% are watchable, but skip a lot. it's sooooo damn frustrating. With all the lost shipping time, we only ever get half the value of whatever service we pay for. If broadband and distro licensing rights ever catch up, digital distribution would be sooooo much better for everyone. As it is, the frustration is enough to make one want to get that eyepatch and move to St. John's, Antigua and Barbuda.

Yarrrrgh report abuse vote down vote up Votes: +1

Prices are up because Netflix can't compete with local rental.

Apr 28, 2008 00:47     

Netflix needs to have more money coming in. Bluray customers have more money. Thus Netflix charges more to those who can pay. More and more people are finding out that remote mail distribution does not work well. It is faster to drive down the street and pick up a disk at the store. Online distribution (Don't call it digital distribution, that would even cover me handing you a cd) is acceptable for sub SD and SD content. HD content looks like trash when sent over the net.

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