Netflix is re-structuring its pricing plan in order to better “reflect the costs” of its service. Bottom line is that they are trying to increase their bottom line with creative price manipulation.
If you’re one of millions of subscribers, you’ve recently received an email from Netflix which wasn’t to tell you that your copy of ‘Flight of the Navigator’ was finally on its way to your mailbox.
Instead it was similar to the one I received:
We are separating unlimited DVDs by mail and unlimited streaming into two separate plans to better reflect the costs of each. Now our members have a choice: a streaming only plan, a DVD only plan, or both.
Your current $14.99 a month membership for unlimited streaming and unlimited DVDs will be split into 2 distinct plans:
Plan 1: Unlimited Streaming (no DVDs) for $7.99 a month
Plan 2: Unlimited DVDs, 2 out at-a-time (no streaming) for $11.99 a month
Your price for getting both of these plans will be $19.98 a month ($7.99 + $11.99). You don’t need to do anything to continue your memberships for both unlimited streaming and unlimited DVDs.
These prices will start for charges on or after September 1, 2011.
You could argue the price changes are in response to movie studios hiking up the rates for Netflix to stream their movies. Since online-streaming has grown exponentially since it started in 2007, movie studios are eager to take advantage of the growing trend. For the same reason it costs $12+ to see a movie at the theater, movie studios are pushing to get as much money as possible from the distributors. So, as always, the cost increase gets passed onto the customer. However, in the past year, Netflix stock has nearly tripled. Clearly this is more a case of corporate greed wrapped in a cleverly (or not so cleverly) disguised pricing redistribution.
Since the announcement yesterday, massive amounts of customers have flooded Netflix’s blog with overwhelming disappointment.
“So, in summary, you’re doubling the cost of what you currently offer without any plans to introduce enough new content to justify the expense? Thanks for the heads-up, Netflix. I’ve been putting off canceling for far too long.”
“Oh yeah, tell your marketing guys they did a pretty good job trying to spin this as a positive thing for users of both streaming + dvd services. By the looks of all these comments, I don’t think users are believing your hype.”
For awhile, Netflix was pretty much the only (and best) game in town. By offering movies streamed cheaply, it was the perfect companion to DVDs mailed to your door. You can view other movies while waiting for your DVDs to arrive. But now with other options like Redbox offering DVDs for $1, having locations within 5 miles of 60% of the US population and Hulu + getting in the game of online-streaming (and on top of everything a disappointing economy) it would seem like now would be the worst time to anger your customers with price-gauging measures. Either people who rely mostly on DVDs through the mail will downgrade their subscription plans to just DVDs for a lower price, or people who rely mostly on streaming will downgrade to just streaming and utilize Redbox for those few times they want to watch a DVD. Regardless, Netflix will be losing money and angering a lot of its customers.
I believe that Netflix gave this timeline of September 1st in order to weigh customer’s reactions to the proposed plan. Judging on the overwhelming negative response and already numerous cancellations of service altogether, I have a feeling Netflix will rethink their price change before then. If not, I think I will be looking up Redbox locations in my town.