Online movie distributor Netflix plans to start charging subscribers who rent Blu-ray movie titles a monthly premium. Netflix CFO Barry McCarthy gave the news Monday during the company’s quarterly earnings call:
“As you are aware, purchasing Blu-ray DVDs costs more both at retail and wholesale than standard definition DVDs, and consumers are used to paying more for high-definition content in every other channel, including video rental stores, video-on-demand, and cable channels.” (via Seeking Alpha)
Some Netflix users may be dissatisfied with the extra charge for a service that was previously free — like having to buy airline snacks after years of complimentary in-flight peanuts. But it makes sense from a business standpoint, as Silicon Alley Insider points out, to only charge the relatively small number of Blu-ray users and keep subscription rates low for normal subscribers.
The percentage of Netflix users who rent Blu-ray is in the low single digits, and CEO Reed Hastings said he doesn’t expect this figure to hit double-digits by the year’s end. Now that Sony’s Blu-ray format has defeated Toshiba’s HD-DVD and most new standard DVD releases come out on Blu-ray as well, the number of consumers with Blu-ray access should increase, countering the incentive for Netflix to offer Blu-ray rentals gratis as a boon for early adopters.
While it doesn’t exactly apply to Netflix’s unlimited rental model, a study by consultant firm Oliver Wyman released earlier this month found consumers are willing to pay up to a $5 premium over DVD rentals for HD content.
