Netflix Mulls Offering U.S. Streaming Only Subscription Option

Netflix (NFLX) CEO Reed Hastings, in a blog post primarily intended to apologize for suggesting jokingly that Americans might be too self-absorbed to notice that the company had just launched service in Canada at a price below the lowest tier available in the U.S., actually broke some news: he said the company is looking at adding a streaming-only subscription plan in the U.S. in the coming months.

The newly launched Canadian plan is priced at $7.99 and is streaming only, lacking the DVD-by-mail feature that was the company’s original business. In the U.S., the lowest-cost is $8.99 – but that includes an entry-level version of the DVD-by-mail service. The company’s revenuers per subscriber have been ebbing recently, as some subs who make heavy use of the streaming feature switch to lower cost plans.

Barclays Capital analyst Douglas Anmuth asserts in a research note that a move by Netflix to offer a U.S. subscription only plan could boost gross margins, given the “extremely low cost” of delivering streaming content. He estimates a customer could stream 16 two-hours movies for the delivery cost of a single DVD.

Anmuth has an Equal Weight rating and $128 price target on the stock.

NFLX is up $3.06, or 1.9%, to $163.53.