Netflix to raise rates for Blu-ray customers

Netflix flexed its muscle Monday, saying it would raise prices about 20% for subscribers who rent Blu-ray movie discs. The movie service said the higher rates would allow it to stock more copies of the high-definition discs to keep pace with demand.

The rate change, which takes effect April 27, will add $4 to the $17 monthly fee paid by subscribers who rent three movies at a time. Customers who rent standard DVDs will not be affected.

Netflix Chief Executive Reed Hastings says Blu-ray now accounts for almost 10% of the company’s rentals. The selection has grown 60% over the last six months to more than 1,300 titles. Nearly all new releases are now available on Blu-ray discs, which sell for about 30% more than DVDs.

The new pricing reflects the higher cost the Hollywood studios charge for high-definition video, Hastings said.

“If you look across cable systems, satellite and also in the downloading space, high definition comes at a premium,� Hastings said. “So this brings us into alignment with all the other channels for high-def.�

The price increase elicited a slew of critical comments on the Los Gatos, Calif., company’s blog.

“I’m very disappointed,� wrote one poster, who identified himself as Mick. “I’ve been holding off investigating alternatives, but now that this price hike is going in, it’s time to look at what else is out there.�

Netflix has been one of the few bright spots in the Hollywood economy, adding subscribers at a time when consumers are buying fewer DVDs.

Despite negative response from some subscibers, the news was greeted warmly on Wall Street. Netflix shares rose nearly 6% to close at $42.03 on a day when the stock markets overall tumbled.

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