Netflix raises price of Blu-ray rentals

Starting on Nov. 5, Netflix customers who rent Blu-ray movies will have to pay an additional $1 per month, Netflix informed its customers via e-mail.

"As you may know, Blu-ray movies are more expensive than standard definition movies," a Netflix e-mail to all customers said.  "As a result, we’re going to start charging $1 a month (plus applicable taxes), in addition to your monthly membership charge, for unlimited access to Blu-ray movies."

The extra dollar will be automatically added to a customer’s bill, and those not interested can edit their account on the Netflix web site.

The pricing change was announced a couple days after Netflix announced its fourth-quarter subscriber and revenue outlook is declining.  Netflix will likely end 2008 with between 8.95 million and 9.25 million customers, which is slightly below the anticipated 9.1 million to 9.7 million. 

The lower number of subscribers means it will miss out on around $14 million.  Netflix attributes the decline in subscribers due to the slumping economy in the United States, which has forced many Americans to cut back on entertainment spending.

Blu-ray is a small portion of Netflix’s rental business, with DVDs still the most popular format rented by subscribers.  The company is expanding the amount of content available for download, as Disney and CBS recently were brought on board to expand Netflix’s online download library to 12,000.

American consumers purchased 8.8 million discs in the first nine months of 2008 — higher than the 5.6 million sold throughout 2007 — but still only makes up eight percent of the video market.

This strong push towards downloadable content has created speculation that Netflix may begin to charge customers additional money for receiving regular DVDs in the mail.  Not publicly confirmed by Netflix, it would make sense for the company to charge more for DVDs that are physically sent out as opposed to digitally downloaded.