Tuesday, July 12, 2011

$2 Dollars Saved. Thanks Netflix!

I knew this email was on its way after reading about all of this nonsense online, so I was already pretty furious of such inevitable news from Netflix. I like having the one DVD sent to me, as that one DVD is what fills the void that Netflix's streaming service has in their library. But if you want to charge me an extra six bills a month to do so, then how about I save that money and rent the two or three new films I rent from the Redbox and still have a few beans left over to buy a taco and a delicious fountain drink?

I understand the fact that Netflix isn't quite making the profits they would like with the streaming/DVD bundle package, but to go and make such a bold price change is simply ridiculous. And sure, some of this money could be used towards investing into more content and a better service at some point, but the point is, this pisses people off and could very easily force many to jump ship entirely from the service. Especially with options such as Redbox and Hulu Plus being out there, with Hulu Plus being just as available as Netflix instant is.

Personally, I see a major benefit from the streaming service over the mailed-in DVDs, so that is where I will be going as of September 1st, and I assume many others will be sure to follow. If that's the case, Netflix not only loses a handful of subscribers, they will also be losing $2 of income from each and every person that drops the DVD plan altogether. That collectively could be a huge loss for the company, unless the ones that decide to keep both services can carry the rest. Either way, I will be losing something, sure, but I will also be saving $2 dollars a month, which is nice. Maybe I'll go to Bermuda.


  1. Yep, that's exactly my plan too! Luckily I only got the DVD part of the plan recently, so I'm not too used to it, and I still get another month and a half of it.

    But seriously, Netflix, the Internet agrees: that was a prick move. You just lost a few cool points.

  2. For sure. There was a better way of handling it, and it is a terrible idea not to go about this with a shared action plan that shows any sort of customer benefit for such an increase. Weak!

  3. Bad Netflix! I know there's a lot on streaming now but there's still a good chunk that's only on DVD so I still feel like I need to keep both. Couldn't they have upped the bundle price like $3 or something instead of 7.99 for each? That's baloney. But really, I watch a lot of TV shows on there too, so $16 a month is still a pretty good price for watching all that crap. For now...

  4. I've been leaning towards just canceling my account altogether, so for them to tamper with their prices and plans yet AGAIN is probably the last straw for me. I have a good video store nearby and enough shit at home to watch. Plus, I barely stream anything on there anyway. We'll see. Thanks for posting this, Elizabeth... I mean "Matt", if that's your real name. ;-)

  5. How can they not give ANY kind of discount if you combine the two? It's absolutely ridiculous. Because of podcasts and such, I can't give up that DVD option since I can't count on everything to be on Instant. At least let them bulk up the Instant catalog! GAH!

  6. TGWLH: I definitely agree that the value is there regardless of price increase. The amount of use I get out of my Netflix is more than worth what I pay, but it's always been the affordability of Netflix that's made it so customer friendly.

    It's gonna suck not being able to get those DVDs, though, but it's just not worth the price for something that I only use a little. I think I get like 3 or 4 DVDs a month from them with how much instant there is to watch.

    Aaron: Ha, now everyone knows my secret!

    I actually have a few video stores near me, but Netflix has always been so cheap in comparison to renting. I may start going that route for the few films that don't make their way to Redbox, but I have enough to watch with their streaming and like you, I always have plenty of shit that I own that I haven't watched yet, so I can survive not having the DVDs sent to me.

    Emily: The instant catalog definitely needs to be bulked up, but if they get enough people to pay for both, I bet they don't rush into that one too soon. And the idea that they aren't charging full price for both is insane. Had they even went up $2 or $3, I might have not contemplated dropping the DVD service, but that much of an increase is ca-razy!

  7. Here's the thing though. Netflix has learned many times over that people grumble about all of the changes they implement: price increases, removal of friends features, etc. But next to no one ever cancels - because even with this price increase the service is still a bargain.

    Consider two more things as well, just for perspective. You mentioned that you get 3-4 discs each month from Netflix, and they'll lose your $2 bucks each month when you switch to streaming. Netflix pays about .88 in postage for two-way shipping on each disc. So at only 3 discs per month, Netflix is paying at least $2.50. It's a tough equation for them, particularly considering most members turn over their rentals much more often.

    Finally, the 3 out unlimited plan, DVD only, will be $15.99 per month, which is much cheaper than it has been in years. All of the people who don't use instant watch are actually getting a price cut.

  8. Another wrinkle, and probably the most important one, in this is that Starz is asking for 11 times the amount Netflix originally paid to stream their library in 2008. That's a jump from 32.5 to 350 million dollars! The Starz - Netflix agreement expires in 6 months, and the companies will have to come to terms or all of that content will simply vanish. People seem to think Netflix will be able to strike a new deal at around $150 million, but that gives us all an indication of why they want to yank up their prices.

  9. Being in the UK I've been keeping an eye on this with interest. I found it hard to believe that it was only $10 for what you guys have access to. Our equivalent here Lovefilm is £10 for the same plan but with a much lesser selection of titles. To me Netflix was never going to be able to keep that price point sustainable, and now they have such a huge subscription base, it seems a good time to drop this bomb. It would be interesting to see the figures for the route existing subscribers choose.

    It's also an interesting point Mark makes, now that streaming is so popular all the other content providers will be looking to renegotiate their deals too.

  10. The pricing plan seems wonky, although I assume Netflix is trying to keep the cost of instant low to try to entice people to instant-only accounts. What I'm concerned about -- and what is probably inevitable -- is that their track history of restocking movies they run out is abysmal. Once more people go to instant, they'll stop restocking any physical DVDs, and you KNOW they're not going to bother with getting licenses for a lot of the films they have on physical DVD right now.

    Mmm. Delicious fountain drink.

  11. 10 bucks for the DVD + Streaming was simply too good a deal to keep around. Netflix wants more people on Streaming only because the bigger the viewer base for Streaming only is, the more leverage they have for bringing in new content. It also lets them know more accurately how much of their income is based on Streaming and how much is based on DVD by Mail. Right now, Im at 2 at a time for 16. Ill probably drop to one at a time for the same price come September 1st.

    It's pretty much the same reason Blockbuster had to do away with trading in mail rentals for in-store rentals, I would think. BB had to change because they were bleeding money under that plan. Netflix is, I assume, changing now before they get to that point.

    All this streaming shit is in a serious state of flux, right now, and I don't think we're going to really know where it will end up for a couple more years, yet. Till then, nothing is really set in stone.

  12. So you can easily assume that I'm pretty lazy so I'm just going to go ahead and ask: does Hulu Plus offers movies in addition to television?

    Because you bring up a good point about finding other avenues for mail-in/streaming films.

    I have been debating for awhile to give up cable and simply stream from my computer. Problem is as far as TV gear I'm suspended in the 90's and too cheap to buy a flatscreen (thank goodness I celebrate birthdays and Christmas). I've been thinking about killing cable when I join the 21st century but I still have to wondering if paying the extra bills for netflix a month is still worth it.

  13. Wow, too many characters for one response?! That's a first!

    Mark: You make a lot of valid points, though, I do see this as being much larger than just a simple price increase; this is double the money for services that have always come together, hand-in-hand. Last time Netflix increased their prices, I dropped from a two DVD plan to one, and now I will be eliminating the DVD plan altogether. That's within a years time, mind you. While many have claimed they will jump ship before and didn't, I think many will this time around with a nearly 60% price increase. There are options out there, whether or not Netflix chooses to acknowledge them.

    $2 might not seem significant in the profit margin when looked on a small scale, however, their overall sales will go down, and those numbers being on the up are just as important as profits and customer counts, which will also go on the decline. Also, you have to factor how many people will be dropping their two and three disc plans either down a DVD or two, or completely altogether. If that's the case, you are talking about a huge hole that will have to be filled by the people who will pay for all of these things.

    I've never looked at my Netflix plan as being a streaming plan with a two dollar DVD add on. In fact, my plan has always been a DVD plan that came with streaming. It's always been there. Of course, with the massive popularity that has come from being able to stream movies directly to your TV over the past few years, Netflix sees the perfect opportunity to charge people for a service that is more than cost efficient because there is now a demand for it. In fact, while Netflix may claim this is a DVD cost effectiveness issue, in all reality, it is a we can make money off of streaming, and a lot of it, too issue. Why would they drop the price of the three DVD plan when it is the DVDs that are costing them their profits? They're testing the waters and it will certainly not stop here.

    Don't forget, less than a year ago they claimed that they will be eliminating DVDs altogether in something like four years time. This will be a test as to whether or not they can do that and make the profits they so desire. Or should I say, the profits that their shareholders so desire, because, what it comes down to is that stockholders want to know what service they are making money from, and how can they make more of it, and what needs to be tweaked.

    Thanks for the comment; it makes for good convo!

    Hero: I knew they would eventually go up in price here and there, which I expect, and the price then and after September 1st is still a crazy deal when looked at in the big scheme.

    I think one thing Netflix does wrong is with using the studios they work with in a way that benefits them both. They are having enough issues with losing both Sony and Warner Brothers movies for the first 28 days of home video release, and that will only happen with other companies, I assume. If they were thinking in a rub my back and I'll rub yours kind of way, they would advertise for the studios.

    Granted, I would hate to see ads at the beginning of my streaming movies, but Netflix has this whole online world to play with and they could very easily just add a "featured content" section to the list of genres. They could feature trailers for upcoming theatrical releases and studio backed video games, which would curb the the price difference between what studios want from Netflix now as opposed to a few years ago.

  14. But wait, there's more!

    Stacia: I've had a slew of movies rented from Netflix that suddenly aren't available on DVD because some asshole kept it or it broke in the mail. Which sucks for any movie that I might want to re-rent down the line.

    And I think you hit the nail on the head. Netflix wants people to believe that they are doing this due to losing money with the DVD service, when in fact they know they can make a boatload off the streaming service. We'll see how the numbers turn out by the end of September!

    James: I think you are exactly right about income accuracy. They can make way more money off streaming and this is them trying to see how much and where they can go from that point forward. What's scary is the fact that they have enough trouble keeping studios happy with even the DVD service, how will it be if they went and focused on streaming when consumers are streaming movies that the studios hoped they would buy on DVD. I expect this will eventually hurt new releases, which there never are really all that many to begin with.

    I think they need to watch their step with other growing options like Hulu (which exclusively carries streaming Criterion!), Amazon and YouTube lomming on the horizon. Amazon and Google (YouTube) have income coming from everywhere, while Netflix only has Netflix to rely on for income, making them easy prey for much larger, competative companies. On top of that, Google, which is on a tour of world dominance right now, is very interested in nabbing Hulu for themselves. if that's the case, it might be lights out for Netflix down the line if they push their costumers away.

    Ashlee: As much as I'm not thrilled about Netflix's decisions here, I think the service, in particular the streaming one, is well worth the money in comparison to the monopoly of cable television. You would probably save some good cash, and, even if you will miss out on some stuff cable has to offer, you will gain so much more. You actually might be better off having both Netflix and Hulu Plus as opposed to cable.

    As for Hulu movies, you can stream both movies and TV shows for free right now, though the numbers are limited. Hulu Plus is $7.99 a month, and that service offers much more from what I know. It's not on par with Netflix as far as content bulk goes, but that will change over time. Hulu does make money off advertising, so they have more profit pull than Netflix does.

  15. I've never looked at my Netflix plan as being a streaming plan with a two dollar DVD add on. In fact, my plan has always been a DVD plan that came with streaming.

    Exactly. We were DVD-only for a long time, and Netflix -- in the tried and true "c'mon, try it, the first one's free" method -- added streaming to the plans. Now my husband uses streaming a lot, so we recently changed to one DVD at a time trying to lower our household costs. From comments I've seen, we aren't the only ones pinching pennies everywhere we can.

    The problem is that a few months ago I realized their service wasn't exactly what I wanted anymore: Lack of replacing disks, slower mail times, iffy streaming quality about 1/4 of the time, and lack of customer service. Yet at the time, the price was low enough I stuck with it. Now that the price has gone up, it's not.

    Netflix is really overvaluing their service, in my opinion. Unless they start improving a lot of things, people are slowly going to realize that they don't have to pay $20 a month to Netflix. That $20 a month can get you Hulu Plus and a subscription to a competitor rental (disk only) place. So Netflix has to offer MORE than those competitors do, and right now, they do not.

  16. Ha, I was just starting to read your post about it! We are connected!

    I think Netflix was always very costumer oriented early on, but as is the case with every successful business, they slowly try to squeeze the people that put them where they are in an effort to make more money.

    Of course this all comes in a time when Netflix almost single handedly put Blockbuster out of business, so I think they might believe that they have a monopoly on the home rental business, when in fact it takes very little for the tides to shift.

    As you said, they have us all roped in already and think they can keep adding on the costs and well will sit stagnant, however, I think they will find that decisions like this can really hurt them in the long run. We aren't that loyal!

  17. The "$2" upcharge for DVDs under the current plan, to which people keep referring, is a fallacy. They are not charging $2 specifically for the DVD service. The DVD-by-mail service was what having a $8.99/mo. Netflix account originally entailed. If anything, we ended up paying the extra $2.00 for the *streaming* portion of the service.

    Now Netflix is trying to turn that on its head, saying "we can't afford to offer DVDs for $2.". Well, the way I see it, they're not. They added streaming to the $8 plan because it was cheap to implement. Let's not pretend it was the streaming that costed $8 all along. That's a load of bull.

  18. Yeah, I've been saying the same thing. Netflix simply just came out and tricked a lot of people by claiming that the service was a steaming one with a DVD add-on, when in all actuality it's been a DVD service with a streaming service included. Surprisingly not many others have picked up on that fact.

    Also, why would they make claims that they are losing money on DVDs when they are charging less for the DVD packages?

    There's a lot of lies involved, and it's sad. Even those that claim that Netflix will have to pay all this money to renew deals with studios seem to forget the amount of money Netflix has made off new costumers due to streaming over the past two years (they've nearly doubled their customer base!).

    The money they are now generating reflects the money they will have to pay the studios, yet they made themselves out to look like the victims to some. They just want more profit in their pockets.

  19. the service was a steaming one

    Best typo ever. Netflix offers a steaming one indeed!


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