Netflix, the company that invented online DVD rental, has dropped the price of its two most popular plans by a dollar a month, in an effort to stave off competition from rival Blockbuster.
It's most popular unlimited plan, which allows members to have three DVDs out at a time, will drop to $16.99 a month, while the plan that allows unlimited rentals one at a time will drop to $8.99 a month.
The price cuts are set to take effect on Tuesday and match price cuts implemented by Blockbuster last month. Blockbuster's key competitive advantage remains its ability to offer free in-store rentals to those customers dropping off their returns in person, something Netflix can not. (Although Blockbuster is now charging a little extra for those "free" rentals.)
Netflix is gambling a large share of its monthly profits by making these price reductions. Earlier this year, the company dropped the price of two other monthly subscription plans by a dollar, but those were much less widely-used plans. These new price cuts are expected to have a more significant impact on the bottom line and represent millions of dollars each month in lost revenue.
[Previously: Harry Potter and The Order of His Netflix Queue]
[Previously: Dollar Days at Blockbuster]
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Update: 7/23/07, 7:28 AM
The price cuts apply to existing customers, as well as new members. Members are not required to do anything to receive the price reduction; the new lower price will automatically be reflected on the next bill, on or after July 24th.
Netflix members are not required to do anything to receive the price reduction. Their new lower price will automatically be reflected on their next bill, on or after July 24, 2007.
In answer to some e-mail queries we've received, we should mention that the $4.99 and $13.99 monthly plans remain unchanged as their prices were already reduced from $5.99 in February and $14.99 in June, respectively.
In a press release, the company said that positive subscriber reaction to lowering the $14.99 plan to $13.99 for unlimited DVD rental with two discs out at a time was an important factor in today's price reductions.
"Netflix remains the best movie rental experience on the Internet," said Netflix Founder, Chairman and CEO Reed Hastings. "Netflix pioneered the online movie rental industry ten years ago and remains its leader by offering convenience, selection and value. Today, value got a boost."
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