Is Netflix's New Pricing Strategy Justified?

[diazona]

Only a small fraction of Netflix's library is available to stream at any given time (well, maybe not that small, but I'd say roughly one out of every 5-10 movies I search for is actually available to stream). So if Netflix terminated their DVD service without making other significant changes, the size of their library drops by perhaps 80% or 90%, which would remove one of the major selling points of the service. Besides, I prefer DVDs since they're not affected by variability in network performance, plus they're less susceptible to technical malfunctions.

 

[FlexGunship]

Only a small fraction of Netflix's library is available to stream at any given time (well, maybe not that small, but I'd say roughly one out of every 5-10 movies I search for is actually available to stream). So if Netflix terminated their DVD service without making other significant changes, the size of their library drops by perhaps 80% or 90%, which would remove one of the major selling points of the service. Besides, I prefer DVDs since they're not affected by variability in network performance, plus they're less susceptible to technical malfunctions.

Hmm, I suppose I use the service differently, then. I don't look for something I want (i.e. search for a movie called: "The Great Garglespatula" and then watch it), but instead browse for something that might interest me. This weekend I watched "A Pixar Story." It was fantastic. Prior to seeing it in my Netflix recommendations I had never heard of it. I'm not big on Hollywood movies unless it's something that is theater-worthy.

EDIT: It just occurred to me the difference: I channel surf Hulu+ and Netflix. I originally got both services to replace my cable box and $70 cable bill, and I must say they fill that niche perfectly.

 

[diazona]

True, in that case I suppose the effect of a lower library size is not so important for people who use the service as you do. But it does still mean that there are fewer good movies to watch in total.

 

[ArcanaNoir]

I think splitting the company was the worst thing they could do after raising the prices. I bet they see a loss of customers that's equal in magnitude to the loss from the price increase, but they'll probably report it as an increase because everyone who signs up to both companies will count twice.

Personally, I really enjoyed Netflix in a casual and occasional way. Streaming was nice for movies on the iPad in bed, and DVDs were nice in the technologically-stunted living room. But I only watch about one movie each way per month. What should I do that's economically favorable? It seems like a waste of money to pay for both services, but what alternatives do I have to rent a single movie on occasion? A RedBox vending machine? Fine if I only want to choose from 20 movies, and crappy ones at that. All the physical blockbuster stores here are long gone. I really enjoyed the huge variety of movies offered by Netflix that was never available in a physical retail location. What viable option do I have for occasional and slightly obscure DVD rental??

 

[QuarkCharmer]

I wonder how they will handle the availability of online streaming movies now.

I got netflix a while ago to watch a series that they had. The streaming service only had the first few episodes, and every 5th or so episode was unavailable! It's not like that "dvd" became unavailable for streaming, they picked out key episodes to remove! Forcing me to get the dvd service. Well, I didn't do that, I just canceled the service.

I wonder if they will still pull these stunts, and promote qwikster instead of the "upgrade to dvd!" option.

 

[wuliheron]

Netflix was always ridiculously cheap and its pretty obvious the reason was they were focused on growing the business into another monopolistic company like facebook. The plan was to first develop the market and expand the business as much as possible rather then focusing on profits right away.

Now with their online and mail order businesses separated the online business is much more attractive for potential buyers and mergers. Amazon is about to come out with their new e-reader which is full color and multimedia capable. They already stream new releases for $4.00 a pop and if they acquired Netflix they would completely dominate the market. Whatever happens its pretty clear that streaming digital content like this is the cheapest and most instant gratification delivery system possible. The same kind of struggle to dominate online video game and music streaming is occurring and within five years I wouldn't be surprised if you could buy a multimedia capable tablet PC from Walmart for $50-100.oo.

 

[Chi Meson]

I've had Netflix since 2003, slightly longer than I've been a member here (August 03). Then, I paid $17 a month for 3 DVDs at a time. When streaming started, I was astounded that there was no additional charge, I kept waiting for the other shoe to drop. Instead it was 2 of the 3 DVD's we dropped, and we went to paying just under $10 a month. We nearly exclusively watch streaming now, sometimes 2 videos at the same time. No TV, no cable, that's all we watch. When a DVD arrives, it sits around the house for a week. We sometimes send it back unwatched.

Now we are paying $5 more per month, still $2 less than when we started with Netflix 8 YEARS AGO. I don't quite get what the gripe is about, for those who have a gripe. It's a buisiness's business to stay in business. When "Quikster" comes about, we'll say goodbye to the disk, no issues.

 

[DoggerDan]

If Hulu hadn't come along and offered ridiculously substandard service for the same price, I doubt Netflix would have raised their prices.

As it is, I have close to 500 movies saved in my Instant Que, so it's not like I need to pay another ten-spot for the occasional DVD or Blu-ray. Redbox is better suited for that, anyway.

Even so, a 60% increase is unacceptably steep. There were some movies I could only rent from Netflix that I would like to have seen. Also, splitting out the division without changing the objectionably high prices was an "in your face" move by the CEO. He lost a lot of my respect.