Netflix raises its rates: Is the convenience worth the higher price?

Photo from from, Netflix sent out a little letter to its streaming-video-plus-DVD subscribers: Your $9.99 a month service is going up by 60 percent.

If you were only signed up for the $7.99 per month unlimited streaming video plan, nothing has changed. But for those who thought they were getting a bargain by bundling in DVDs by mail will now have to pay for the DVD service separately. It'll cost another $7.99 per month to have one DVD out at a time, bringing the total cost to $15.98 per month. The new price structure takes effect September 1.

"We are separating unlimited DVDs by mail and unlimited streaming into separate plans to better reflect the costs of each and to give our members a choice: a streaming only plan, a DVD only plan or the option to subscribe to both," Jessie Becker, vice president of marketing for Netflix, wrote on the company's blog.

People weren't pleased by the price hike. As of this afternoon, nearly 7,500 people had left comments on Netflix's blog and there were more than 36,000 comments left on its Facebook page-and the vast majority of them were not positive.

"There are plenty of alternatives, and we will likely pursue them," Timothy Andersson wrote. "I'll go ahead and cancel my subscription. Thanks!" quipped Chad Dukes of Washington, D.C. "Unless they put all the new titles on the instant plan, they are going to lose a lot of customers," Matt Stea of Baltimore, Maryland, pointed out.

Some offered advice. "I think you should fire your marketing department," wrote Blake Davis of Ashburn, Virginia. " Anyone that comes up wit ha 60% price increase scheme and forgets to NOT include even a minimal increase to the service or content at the same time to distract, confuse, bamboozle, or lie to your customers is just stupid.

And Radny Bonifield of Berklee offered an ultimatum: "Dear Netflix: This is your 30 day notice. You have until August 12 to upgrade your streaming content with current releases and a better selection of family oriented films or you will lose this faithful customer. Period."

It's likely that the price increase is tied to another service fail Netflix customers experienced in late June, when more than 250 movies made by Sony Pictures-including blockbusters like "The Social Network" and "Salt"-suddenly became unavailable. The reason? A complicated agreement between the DVD-by-mail company and the cable movie channel Starz.

"As part of its agreements to carry films from Sony and Walt Disney Studios on television, Starz, which is owned by Liberty Media Corp., also acquired the online rights to their movies," a post at the LA Times blog "Company Town" explained. "In 2008, Starz struck a four-year deal to distribute that content to Netflix that ... covers more than 1,000 movies a year."

Buried in the contract, which is set to expire in the first quarter of 2012, was a cap on the number of Netflix subscribers who could access the Sony movies, the LA Times reports. So far, Disney movies are still available on Netflix, but in order for Sony's movies to return, "Starz needs to renegotiate the terms with the studio and is likely to seek higher payments from Netflix."

And it looks like that higher payment might have been passed right along to Netflix's customers.

Do you use Netflix? Is the convenience of getting movies by mail is worth the higher price?

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