Netflix's elimination of bundled DVD and Internet streaming plans -- effectively a price hike for customers that want both services -- is designed to push subscribers toward the more-profitable streaming-only option but will result in higher churn, according to analysts.
The company cited the need to better reflect "underlying costs" in announcing the change, which will increase the price of the one DVD-out-at-a-time plus streaming up to 60%, from 9.99 per month to $15.98 ($7.99 for streaming and $7.99 for the one-DVD plan).
"It would seem that NFLX is trying to push subs to streaming and/or using discs to fund the rising cost of digital content," Janney Capital Markets analyst Tony Wible wrote in a note.
Netflix has said it costs about $1 per DVD for shipping and handling, whereas streaming a full-length movie over the Internet is estimated to cost 5 cents or less. In 2010, Netflix paid more than $500 million to the U.S. Postal Service to deliver DVDs by mail.