Netflix To Raise Prices on High-Def Rentals?

Video Business: Netflix CFO Barry McCarthy, speaking at the Thomas Weisel Partners Technology, Telecom & Internet Conference: "If a winner emerges and we experience some margin compression if a large number of subscribers rent in high-def, we’ll weight the options of increasing prices." He also commented on the longevity of the DVD format: “There are 100 million DVD players in U.S. households,” McCarthy said today. “If you really think people are going to stop renting DVDs, you need to lie down until that thought passes.”

The possible high-def price increase is getting some press, but this is not the first time that Netflix has talked about increasing prices. Netflix CEO Reed Hastings had this to say during the Q4 2007 earnings webcast:

Andy Hargreaves - Pacific Crest: Back to Blu-ray, can you just give us a sense for how you think the pace of adoption, now that the format is more or less decided, how that affects your content acquisition costs? Does it have a material effect if Blu-ray players start growing a lot faster?

Reed Hastings: You are assuming that Blu-ray is going to win there and I made the mistake -- I don’t know, a year or two ago before the HD DVD camp flipped Paramount – of thinking the same. So remember that we are all judging it by studios and if they manage to flip another studio to their camp then we’re back to stalemate again.

But if one format, presumably Blu-ray, takes off that will have an effect; the Blu-ray disc costs a little more so that will have an effect upon us in terms of content costs. But also the perceptions of consumer around HD are that every other HD option costs them more. So for example, video on-demand HD usually cost $5 or $6 instead of 4; or video or HD channels from Comcast and others cost an additional supplement.

It may be that we have room to be able to do HD-specific pricing as we get to volume on this because the competition for the consumer retention on HD is all around that also. So that is something we will know you know more maybe by the end of the year as we look at the success of the HD formats.

Thanks to Badasscat for sending this in.

Comments

[Mike]

Maybe if they raised prices they could actually buy more Blu-ray movies. Anything remotely popular in my queue is Very Long Wait and long wait.I'd pay more if it meant more inventory.

[Super-Bat-Man]

I've been a happy member for 2 and a half years but if they raise the prices for hi-def discs one of three things will have to happen:

a.) have to make it so hi-def discs are as readily available as DVDs (none of this very long wait on everything. I'm not paying to continue waiting for discs that I never get.)

b.)make watch now viewable on Macs. (Why should I pay for watch now when I don't even get to use it? If they are going to raise prices for HD than they need to do it for Streaming Video as well.)

or

c.)I drop them like a bag of dirt (I like the service and all but making pay for a service I don't even get to use and then charging me extra for one of the services I do use but rarely get?...nah, I'd have to drop them on principle alone.

[Super-Bat-Man]

What I meant about "Watch now" is that they should lower the prices for mac users or give the option to turn it on and off like the HD option. Either way they should be charging non users less. Not giving the users of watch now the non-users hours.

[eviltimes]

What does it matter? NF doesn't have any copies of high def (either format) movies to rent anyway. And stores like Blockbuster, etc have hundreds of titles on their shelves.

I already went through my queue some time ago and returned all my high def titles to regular DVD, at least I have a chance of seeing them sometime soon (even with throttling).

[badasscat]

COuld be the deals they had with studios to stay neutral.....Blockbusters never had HD-DVD.

Besides,they also figure,..if you have the TV,Player,....etc...and the discs are higher,...then they nick ya for more.

TBH,...I believe you guys got a good ride till now,...and you just need seperate plans instead of opting in or out on regular.

[Sparkles]

To Super-Bat-Man
"b.)make watch now viewable on Macs. (Why should I pay for watch now when I don't even get to use it? If they are going to raise prices for HD than they need to do it for Streaming Video as well.)"

Why is it so hard to understand that you don't actually PAY for watch now? Were you a member 2 years ago, when you paid the same prices and no one had instant watch? The prices were the same as they are now, well a dollar more, but the prices have certainly not gone up, so really you are not paying for instant watch. Do you not grasp the concept that netflix is not really at blame for this? Honestly, do you really think they like to hear all of this whining and b*tching from people? You can sit here and tell me otherwise, but frankly, I simply don't see what the whole whining is all about.

[hueristix]

They could never do this until there is more HD selection. It is funny we debate about downloads and HD discs but if you want SELECTION there is still only one king.... that's right I agree with Barry and Reed, the death of the DVD has been GREATLY exaggerated!

[Busthead]

“If you really think people are going to stop renting DVDs, you need to lie down until that thought passes.”

I love it! He's so right. If you think On-demand, itunes, or any other service is going to overtake dvd rentals in the next decade, you're on drugs.

For On-demand you need cable. Cable sucks! It costs $60 a month, most of the content is crap and all of it is laden with commercials. Why have cable when I can rent the best TV shows from Netflix? Sports, that's why. The only thing I miss not having cable is the NBA on TNT but if there is a game I really want to watch, I just go to the bar.

iTunes is cool but the selection sucks and they don't have a rent all you want subscription service.

Amazon Unbox on TiVo is the only service that really kicks Netflix's butt. Partnering with Tivo or buying them outright would have been a much better idea than an Netflix specific box from LG.

[MovieFiend]

Busthead- Just a reminder, Lg is the first of many partnerships that Netflix is working on. I'm sure there are plans in the works for MANY other boxes, just other companies aren't ready to take the financial plunge until they see how well LG does.

[Old Timer Too]

“There are 100 million DVD players in U.S. households,” McCarthy said today. “If you really think people are going to stop renting DVDs, you need to lie down until that thought passes.”

Heh. And then on those "superior" DVDs (HD or Blu-Ray), you still get to watch the threats of prosecution for even thinking... That and all the disclaimers. And all that extra junk that is -maybe- worth -one- watch.

With a high-quality projector, I still have better, more consistent picture quality than I see in my local movie theaters. And that's not HD.

[frank]

Once Hi Def is the standard, won't prices be the same as regular DVD's now? I know the manufacturing costs are a little higher, but the pricing seems mostly marketing driven. I am happy with regular DVD quality and won't pay a premium. It would add little to my enjoyment.

I think the optimal price point was found and they will maximize profits by not having a premium?

[Gir]

As long as DVD is dominant and DVD prices stay where they are, hi def will remain more expensive. The price won't drop till the new format displaces DVD, which won't be for a long, long time, and maybe not even then.

[Bob, Lindenhurst, NY]

I'm going to go and make the obvious comment of "how will they charge extra for hi def?" Yes, cable, iTunes, Xbox, DVDs etc. charge more for Hi-Def, but that's on a per movie or show basis and Netflix is pay 1 price. Sure, 10 years from now when everything is hi def charge more, but how do they do it now? Seems like a non-starter to me.