Netflix Launches Streaming-Only Service

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Netflix is already the king of movie rentals, but now it wants to be the leading company for watching online videos as well.

Netflix (Stock Quote: NFLX) launched a new streaming-only service Monday that lets users watch unlimited movies and TV shows on Netflix.com for $7.99 a month, but does not let users rent DVDs.

At the same time, the company will raise the prices of its existing rental services by $1 each: It will now cost $9.99 to receive one DVD a month and stream an unlimited amount of movies online and $14.99 for two DVDs and unlimited streaming video.

This is a stark change for a company that made its name more than a decade ago by giving people a cheap and easy way to rent DVDs online, arguably causing the former leader in the market, Blockbuster, to go bankrupt. But now Netflix seems to believe it faces a new threat from another popular video site: Hulu.

Earlier this year, Hulu launched a $10 premium model that lets users watch entire seasons of current television shows, as well as a long list of movies. Last week, Hulu decided to lower that price even more to $7.99, which seems to have prompted Netflix to match it.

Until recently, the two companies largely operated in different spheres. Hulu focuses mostly on providing up-to-date TV episodes while Netflix provides rentals and streaming for older seasons and movies that have already come out on DVD. Yet most of Netflix’s recent innovations have focused on making more of its content available instantly on computers and smartphones, rather than developing the old delivery model for DVDs.

Indeed, it seems much more logical that Netflix would need to assert itself in the online video world than Hulu needing to step into the DVD-rental world, since the former is where all the expansion is taking place.

This might partly explain why Netflix would decide to make its existing services more expensive. The company may be trying to encourage more people to take advantage of streaming options and begin the process of moving away from the old rental model.

However, for consumers who watch a lot of television and movies online, it still makes sense to sign up for the rental service, at least for now, as it includes a wider selection of movies and shows starting at just $2 more per month. This may change though as Netflix continues to make more content available to watch instantly on its site.

If you’re not ready to commit to paying for online streaming on Netflix of Hulu, check out these five sites where you can still watch television shows for free.

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