Peter Kafka

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Here’s the Netflix Streaming-Only Service You Asked For–And a Price Hike, Too

Okay, Netflix subscribers who clamored for a Web-only version of the video service. You get what you wanted.

Everyone else? You get a bigger monthly bill.

As I predicted last week, Netflix is introducing a streaming-only service priced at $7.99 a month. And it is raising the prices of its other service tiers.

The company’s most popular $8.99-a-month plan, which offers Web streaming and the ability to rent DVDs, will go up by a dollar, to $9.99. Its more expensive plans, which give subscribers Web streaming and the ability to check out multiple discs at a time, will also see a bump.

The Web-only service is available now. The price hike kicks in immediately for new subscribers, and in January for everyone else. You can read details on the company’s blog, but here’s the pricing grid:

Netflix CEO Reed Hastings is doing a couple different things with the price hikes: He’s trying to generate more revenue, obviously. And he’s also trying to convince existing and potential subscribers that the Web-only service is a good deal.

That will be a bit of a challenge, because Web-only subscribers are signing up for an option that offers a lot less than regular Netflix.

The standard Netflix service gives you access to just about everything that’s ever been put on a disc, along with access to Web video. But the streaming-only service offers only about 20 percent of the company’s physical catalog. (It’s much closer, though, to the catalog available on Hulu Plus, which is now priced at $7.99 a month, too.)

Unlike DVDs, which it can literally buy off the shelf if it needs to, Netflix has to secure and pay for the rights to stream videos. It has been ramping up those efforts–and racking up a billion-dollar bill along the way–but it’s going to be a very long time before its physical and digital catalogs come close to parity.

So stretching out the price difference between the all-streaming version and everything else might help subscribers get over the fact that the all-streaming version is really Netflix Lite.

And that might be fine for some of you: Netflix says that the streaming-only version that it launched in Canada, at essentially the same price, is doing well. But that’s the only Netflix option Canadians have.

Eventually, it’s supposed to be okay with the majority of Hastings’s customers. The new mantra at Netflix is that it’s “primarily a streaming video company” that still happens to deliver some DVDs by mail. But I don’t think Hastings’s customers are ready to give up their discs quite yet.