Netflix testing cheaper subs

Execs say online renter won't raise prices if Blockbuster does

By Jennifer Netherby -- Video Business, 11/16/2005

NOV. 16 | Netflix is testing lower price points on its monthly subscription plans, chief finance officer Barry McCarthy told analysts and investors at the Lehman Brothers Small Cap Conference Wednesday.

“The reason we’re testing it is we think the market is price elastic,” McCarthy said.

The company also believes lower prices could drive more subscribers its way, forcing some moderately successful video stores to close and push even more renters online. As more people go online, the company expects to have to spend less money on marketing, McCarthy said.

A day earlier at the Pacific Growth Equities Top Pick in Tech Conference, McCarthy said that Netflix had no plans to raise its subscription fees if Blockbuster raises its fees.

Netflix is continuing to work on download technology, though it announced at its recent earnings call that it would postpone launching a download service until studios license more content for downloads.

Netflix favors online downloads licensed on a subscription basis, rather than on an a la carte basis, McCarthy said. Execs believe the subs approach is more popular with consumers, he said.

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