Netflix Isn't Giving Up on DVDs Just Yet


Netflix knows that it's mailing out dinosaurs, but it's not ready surrender to the inevitable extinction of the optical disc.

I -- and probably countless others in the thinning herd of DVD renters -- received a promotional email from the leading video service this morning, offering a free upgrade from the single-disc plan to the two-disc plan through my next billing cycle.

"Upgrade to our 2-Out Unlimited Plan and enjoy the introductory price of $7.99 for the first month," reads the "Double Your Pleasure" promotion available at "After the promotional period you will be charged the regular price of $11.99 a month for the 2-Out Unlimited Plan."

Let's be frank: Netflix isn't losing faith in its more popular streaming platform. Its latest holiday-themed commercial is all about the streaming. Ever since Netflix began breaking out its disc- and online-based subscribers, we've seen nothing but sequential declines on the DVD and Blu-ray end, and CEO Reed Hastings has said the trend will continue forever. Outerwall's Redbox is the only outfit currently growing its DVD rentals, and that meager growth may be harder to come by after Blockbuster runs out of stores to close.

But Netflix clearly sees an opportunity here. It's not about attraction; this is all about retention. This is all about getting disc-based subscribers to consider paying more for additional content.

Netflix has made it clear that $7.99 a month for its streaming plan is here to stay. It recently introduced a plan where members can pay a bit more if they want more than two streams running simultaneously, but that family plan isn't likely to gain a lot of traction. It's probably easier to talk someone on a disc plan into tacking on more movies than it is to get a streaming customer to pay more, making this a novel way to try to push higher the average revenue per user.

Netflix didn't push its disc-plan prices higher when Outerwall's Redbox moved to increase its DVD rental rates by 20% two years ago. It hasn't passed on postage increases either. Discs are diminishing in relevance at Netflix, but it doesn't want to rock the boat. But now it's reaching out to what may be its most loyal subscribers to see if they want to double their DVDs for a 50% increase in cost. Even if most of them will revert back to the cheaper plan at the end of the promotional month, you can't blame Netflix for trying.

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