Netflix CEO Reed Hastings wants to raise rates on Blu-ray renters and expand its internet and game console distribution business.

During its first quarter conference call, Netflix Chief Executive Officer Reed Hastings hinted that prices for renting Blu-ray DVDs will rise later this year.

Hastings explained to his investors the current pricing arrangement for high-definition DVDs and why Netflix will be able to profit from early adopters.

“As you are aware, purchasing Blu-ray DVDs costs more both at retail and wholesale than standard definition DVDs, and consumers are used to paying more for high-definition content in every other channel, including video rental stores, video-on-demand, and cable channels. Because of the higher cost of Blu-ray and the consumer expectations around high-def content, we are planning on implementing a modest monthly premium for access to Blu-ray some time this year.”

“Today the percentage of our [subscribers] who rent Blu-ray is in the low single digits,” he cautioned, “but it is sure to grow going forward.”

“Over the coming years, Blu-ray DVD players will fall in price and become more widespread,” commented Hastings. “With the success of Blu-ray and its emerging economic importance to the studios, the DVD market is more likely than ever to remain enormous for many years into the future.”

Beyond Blu-ray, Netflix sees room for growth in Internet distribution.

He emphasized, “In particular, we want our client software integrated into Internet connected Blu-ray players, game consoles, TVs, and standalone set-top devices.”

“While the success of Blu-ray is important to us, just as important are the improvements we’ve made to watching instantly over the Internet,” remarked Hastings. “Today our instant watching functionality is only available on Windows PCs, which works well for our subscribers who are comfortable watching video on their laptops and for our technophile members who hook up their computers to their TVs.”

Source: Silicon Alley Insider

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