Netflix Raises Prices (Again), This Time Angers Customers - The UpStream

Netflix Raises Prices (Again), This Time Angers Customers

posted Saturday Jul 16, 2011 by Nicholas DiMeo

Netflix Raises Prices (Again), This Time Angers Customers

Just about 8 months removed from Netflix raising their prices by $2 to compete with Hulu Plus, the company is restructuring and raising prices again, this time angering over 60,000 "fans" on Facebook. However, it seems that everyone is misunderstanding what the price change actually is and who it affects.

At first, Netflix bundled their unlimited streaming service along with their DVDs by mail as a package for $7.99 a month, then up to $9.99 as mentioned earlier. Netflix has now launched DVD-only plans that offer unlimited DVDs, one at a time, for $7.99 a month, or $11.99 for two. This now gives customers who only want DVDs a low-cost option to do so, especially now that BlockBuster is almost out of the picture.

The reason everyone is so mad though is because Netflix is now separating the DVD and streaming packages. It's going to make it a little more expensive if you want both, and we'll talk about that after the break.

Netflix is now giving customers a streaming-only option as well, at $7.99 a month. In their blog post, they explain it:

Second, we are separating unlimited DVDs by mail and unlimited streaming into separate plans to better reflect the costs of each and to give our members a choice: a streaming only plan, a DVD only plan or the option to subscribe to both. With this change, we will no longer offer a plan that includes both unlimited streaming and DVDs by mail.

So, essentially if you want both options now, you're going to pay for it, at $15.98 a month, nearly a 60% increase from the last price change. This is what has everyone so chatty throughout forums, Facebook and even the local news stations. Many people are claiming that Netflix is just greedy. Let's first analyze Netflix's reasoning behind the change.

Last November when we launched our $7.99 unlimited streaming plan, DVDs by mail was treated as a $2 add on to our unlimited streaming plan. At the time, we didn't anticipate offering DVD only plans. Since then we have realized that there is still a very large continuing demand for DVDs both from our existing members as well as non-members. Given the long life we think DVDs by mail will have, treating DVDs as a $2 add on to our unlimited streaming plan neither makes great financial sense nor satisfies people who just want DVDs. Creating an unlimited DVDs by mail plan (no streaming) at our lowest price ever, $7.99, does make sense and will ensure a long life for our DVDs by mail offering. Reflecting our confidence that DVDs by mail is a long-term business for us, we are also establishing a separate and distinct management team solely focused on DVDs by mail, led by Andy Rendich, our Chief Service and Operations Officer and an 11 year veteran of Netflix.

Basically, their thought is that they can make more money on the DVD-only option if paid for separately from the streaming option, as now they don't have to pay for any postage costs on the streaming package.

However, that is not the sentiment of the outspoken customers, who obviously are outweighed by the ones still subscribed to the service. Their feeling is that Netflix keeps upping their cost without any value; however, the value as we know, is inside the DVDs by mail. No other company has that service now, and Hulu doesn't even offer DVDs, not to mention that they don't have an extensive lineup of devices capable for streaming. You have RedBox, who charges $1 per night of each DVD rented, which if you watch more than 7 DVDs a month, keep one for more than a night or forget to return it, costs much more than the $7.99 a month for DVDs. Some users, like myself, didn't want the DVD option but had no choice to pay the upcharge because the services were combined.

In the grand scheme of things, this move makes sense. What people aren't seeming to get through their head is they have the option to cancel one of the packages if they don't get any use out of it. Instead, the few thinking they are entitled to everything for free are threatening to boycott Netflix and switch to Hulu or go to RedBox or Blockbuster. Unfortunately, neither of those options are going to matter to Netflix, as their $2 billion river keeps on flowing and as long as they keep putting out fresh content and a consistent streaming quality, I don't see them failing here. Plus, with the price hike, they can afford to lose some of the customers who really weren't even happy to begin with. I'm happy I got only what I want at a lower price. If you want more, you have to pay for it. Adversely, go see if Hulu Plus is considering a DVDs by mail service once eBay buys them.

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