Netflix shares rose 7 percent to $184.71 in morning trading following the announcement.
The move is part of Netflix’s push to phase out its DVD-by- mail business, said Gabelli & Company analyst Brett Harriss.
“For a while, the goal of the company was to change its business model from DVDs to streaming because it recognizes the DVD has a limited shelf life at this time and streaming has higher margins,” Harriss said.
The company said on Monday the plan will take effect immediately for new subscribers and in January for current members.
Netflix, which gained success as a DVD rent-by-mail service, ended the third quarter with 16.9 million members in the United States and Canada. It debuted its first streaming-only service in Canada in September.
Its streaming video library is still tiny compared with its DVD by-mail selection and Harriss said the company would have to continue spending on expensive content deals to boost its digital offerings.
Netflix already has pricey partnerships with EPIX pay TV channel, estimated at $1 billion, and NBC Universal, a unit of General Electric Co.
Netflix has undergone stellar growth since its 1999 debut. Its shares have gained many-fold since a 2002 IPO.
In late October, the company said it expects to generate $586 million to $598 million in revenue in the fourth quarter.
The Los Gatos, California-based Netflix competes against companies like Hulu Plus and Coinstar Inc’s Redbox, which is soon launching a streaming service. Amazon.com Inc has also considered an online video subscription service.