Does anyone share my opinion that Netflix should have taken this opportunity to clarify as to why these price hikes are inevitable, due to the sky high content licensing costs they themselves have to pay to the content providers to keep streaming possible. I didnt see any mention of this in their entire PR release and I think at least the community would have read that and not perceived this announcement as a "more money grab" and as Netflix doing what it has to, to keep offering the best content available for streaming.
I think it threw away that chance and left the door open to a lot of these "entitlement" type comments that harp about how Netflix used to charge $8 per month and can never ever change that. Ever.
I for one, plan to stay with Netflix and opt for the Streaming option as long as it makes sense. As for DVD/Bluray, I will go to my neighborhood Redbox.
Blockbuster? You, I havent yet gotten over the $4.99 rental fee, so you stay in the shit list for a little while longer.
You sure this is a licensing thing? Maybe they are just putting spin on it, but it sounds like they are saying they were taking a loss on the DVD side of things (or just making minimal profit) in anticipation of DVD's going away, and have discovered DVD's aren't going away as fast as they planned.
I mean, really, post is something like $0.40 these days. Unless a postal service gives them a price break, the $2 DVD fee is entirely consumed by the cost of mailing you (and you sending back) 2.5 DVD's per month.
> and have discovered DVD's aren't going away as fast as they planned.
I think they are being dishonest about their "bafflement" over the persistence of DVDs. I think the real reason is the quality of their streaming collection. There a few gems but it is filled with a lot of sub-par, unwanted, titles. I for example, have watched all the streaming videos I want for a while. Now I am just waiting for the new ones to appear and watching real DVDs I get in the mail.
But to give them the benefit of the doubt, it would be interesting to see how they determined that streaming just isn't that popular. They could have judged by the total # of subscribers that have ever setup or watched a streaming title? The best way would be if they focused on titles offered both in streaming and non-streaming form, then investigated which form people actually choose.
Definitely agree that it's easy to burn through the good streaming material and hit a roadblock where it's only worth checking news additions. I think in addition to that, there are certain people that still go online on Sunday/Monday to order a physical DVD for the next weekend: namely my parents.
I got a Roku for them a few years ago to make it easier for them to stream. Last time I was there I noticed it was gone. When I asked about it they said that once they got a new TV they didn't really want to set it up and gave it to my sister (I didn't take any offense, and at least it's being used now).
I actually enjoyed it since it was a good reminder of how everyone has a threshold for the new/innovative/convenient vs. the familiar/comfortable.
This doesn't change the crux of your comment, but the post office does give them a price break; in fact it gives everyone a price break, all you have to do is sort your mail by zip code.
The way it works is if you send enough mail to the same zip code, then you pay a certain discount (a few cents per mail piece) if you package all of that mail together. The amount of the discount varies depending on if you sort by 5 digit zip code, or just 3 digit zip code prefix.
Yes. Their contract could specify that. They could also specifically state which titles can be streamed and which can't ( I think that is actually the case, that is why their streaming selection is not as good ).
I keep seeing Redbox mentioned. Financially, it's a rational decision to split consumption between Netflix and Redbox. But I believe that most of the appeal in Netflix is the convenience of getting the movies at home, without having to go outside. It's 87F here in NY right now -- do I REALLY want to leave my AC'ed room and go get a movie? Probably not. Disclosure: I'm a VERY early adopter of Netflix streaming, first through the browser and then through a bluray player I purchased 3 years ago.
"Netflix has another year or two on most of these contracts, and then the game completely changes," says Michael Pachter, analyst at Wedbush Securities.
Pachter predicts Netflix's streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012.
Michael Pachter is an analyst for a private equity firm. Google for some choice opinion and meta-analysis.
And for all we know, Wedbush is short on NFLX.
People have been parroting this guys opinion as if it's fact. It's worthwhile analysis, perhaps even correct, but they've got money in this game on one side or the other and without knowing which, this opinion is useless.
Yes it did. It increased 4x for a large portion of their users (including me). My 12 bucks a month for 1 blu-ray and unlimited streaming is now 8 + 10. So if the cost of one blu-ray a month is 9.99, I was getting streaming for 2 bucks. Now it costs me 8.
You could look at it the other way and say that I was getting 1 blu-ray a month for 4 bucks and now it's costing me 10. But since Netflix historically has been about the DVDs, with the streaming as an addon (historically = before 2010) I think my first price comparison makes more sense.
No, but it could be netflix helping the acceleration of the DVD's demise. Also, I'm sure the additional monies made from those who still rent DVDs will be used to help support the ever increasing cost of streaming content.
Movies have already been disappearing from Netflix's streaming service, so I'm sure licensing issues are at least part of the reason for raising the prices.
I'm really unclear how the 1 disk out at a time is 'unlimited'. It's more along the lines of 'either I or my wife can see our choice'. And to call their streaming unlimited ignores the lack of depth in their streaming catalog.
I really only want the dvds for things that they don't stream. So, their new dvd plan is essentially a tax on me for their streaming plan not being good enough.
And now, given how often I actually get around to watching something, It's barely worth it at the current price, and not worth it at 2x.
[ edit quantification -- I've been a member this time for a year and a half, and just shy of half the streaming was in the first week, (two sick parents and kids to entertain will do that), and 7 titles streamed in the last year. We've gotten 7 dvds in that whole time, and watched all of 3 of them. Doing the math -- not worth $16/month. ]
It's unlimited because you can check out as many different movies as you want (building in transit time obviously). Netflix doesn't know or care you have a wife who wants a different movie, if you want two movies at once get a plan that supports that.
Similarly, unlimited streaming makes perfect sense because you can stream as many as you want. The selection of their available physical DVDs is limited as well, you always have to stay within their catalog.
I think the throttling thing was a long time ago. I've been a Netflix subscriber for 4 years and have never been throttled. And yes, there have been many occasions where I've sent discs back on the same day I received them (putting them in a blue mail box that hasn't been picked up yet). The only delays I've ever had were due to postal holidays or once when a couple of discs over a span of a few days were mangled in some processing equipment (the USPS dutifully delivered the torn-off front flap to me, sans DVD).
Netflix has never stopped "throttling", perhaps it has gotten better over the years as they opened more distribution centers & expanded their library, but it's never gone away. They are rather vague about how it works & don't want to explain it to customers which is why they tuck it deep in their DVD Terms and Conditions.
DVD Terms and Conditions
As a result of your viewing habits and our operational practices, the actual number of DVDs you rent in any month may vary, and you may experience differentiated service during the course of your membership. Also, such service may be different from the service we provide to other members on the same membership plan. The type of differentiated service you may experience includes, (i) the shipment of your next available DVD occurring at least one business day following return of your previously viewed DVD, (ii) delivery taking longer, as the shipments may not be sent from your local distribution center and (iii) the DVDs you receive coming from lower in your Queue more often than our other members.
Netflix has algorithms that decide how quickly your next dvd is sent. More accurately, it uses a score to rank the group of people who have the same DVD at the top of their queue in order of who should be allocated the next available copies.
This score is based on a number of factors, with the objective being to maximize subscriber happiness (one example question is whether is it more valuable to have quick turnaround for a frequent subscriber who is already happy with the service, versus an infrequent user who might be on the fence--it is not obvious who would be more sensitive to and negatively impacted by a delay in receiving the next DVD).
(Source: I work with people who previously worked at Netflix. This is not confirmed fact but a loose understanding based on casual conversations.)
Living in Hartford (home of a distribution center), I find that I am still experiencing some throttling on my unlimited disk plan. I recently went on watching Big Bang Theory and saw a surprising decrease in turn-around-time as I started to return disks at a regular pace again.
I don't know if it is actually due to throttling or not, but Netflix is preceived at least to still be throttling me.
Same here. Our turn-around is usually two days. We routinely get the "we've received" emails but our next ones won't ship for 1-3 days after that. It's annoying considering the "unlimited" plan claim.
Really? Sources tell me that they copy each DVD and drop it back in the mail the same day, yet these sources report no apparent delay in receiving the next DVD. This is on a 1 DVD subscription, btw.
This sounds less like "throttling" (i.e. you've gone through too many discs this month) and more like balancing (i.e. how do we distribute 100 copies of this movie to the 1,000 subscribers who have it at the top of their queue).
The lawsuit is the reason that disclosure is in the Terms of Service now. It was not previously in there, that is why they were sued. The settlement required them to disclose this practice so that customer's could make a potentially more informed decision about what Netflix offers as a service.
You are correct that it really only affects situations where demand outstrips available supply.
While I believe internally Netflix called it smoothing or something like that, throttling isn't an inaccurate term either.
Much of the anger came from the fact that an existing customer could put something in their queue & see "Long Wait" which may mean that movie would probably be delayed weeks or even months. Meanwhile their friend might setup a new account that weekend & get that same movie immediately. This lead to people feeling as though Netflix was shafting existing customers while at the same time giving new customers an unrealistic experience.
Many sign up thinking they are going to be saving a lot of money by going with Netflix, but if their main interest is new releases then they are going to have difficulties getting every new release in a timely manner. This is something that Netflix doesn't really disclose very well & they are a little misleading with their marketing as you'll often see them promoting mainly new releases in a lot of their marketing material.
One more thing is that Netflix has gone as far as hiding certain new releases on it's New Releases section on purpose so as to prevent people from being able "hog" all the new releases. This seems rather anti-customer & goes against their original motto "Connecting People With Movies They'll Love", which really boils down to "We want you to use our recommendation engine which steers you towards movies that cost us the least...".
> And to call their streaming unlimited ignores the lack of depth in their streaming catalog.
Exactly. They spin this as a surprising thing they just noticed:
---
we have realized that there is still a very large continuing demand for DVDs both from our existing members as well as non-members.
---
In other words they are sort of "baffled", how come people still want to watch DVDs by mail ... hmm. Of course, it is because they streaming selection is so poor. I, for example, have reached the limit of dvds I wanted to see in the streaming section. I am just waiting for some new ones to appear or just re-watch the old ones.
I guess a strategy in my case would be to switch to mail only for 6 months, then switch to streaming only later, and just alternate like that.
That's why I dropped my Netflix streaming account. I'd seen every streaming video I had any interest at all in seeing, and months would go by before I had an interest in watching something they added.
The streaming selection is getting better all the time. They are adding stuff faster than I can watch it. And I already have 100's of hours in my queue.
For me a bunch of stuff has disappeared while I was trying to get through a series. I'm now wary of starting any long series for fear it will be gone before I get to the end. I used to get on netflix to see what new stuff was added, now I get on to see what's been taken off.
It really sucks when things just vanish from your queue and you find they're gone from the service for good. Feels like bait and switch.
Looking at the comments I'm amazed at how quickly the sense of entitlement sets in. Netflix cut the cost and hassle of entertainment by 80-90% over what was traditionally available from rental stores and cable subscriptions a few years ago. Big content is seeing their profits evaporate and playing hard-ball with Netflix, and all you get is whining from customers about paying $15/month.
It doesn't matter that they cut costs compared to "what was traditionally available". What matters is they RAISED costs compared to what they had before. For a long time now, I shared a plan with my parents - they used the DVD's, I used unlimited streaming, and we were happy. Now we have to get two separate plans, and pay more. Since there's no better option, we'll do this, but I think we're fully within our rights to complain.
This may be one of the exact scenarios they are after. I share a Netflix plan with my parents as well - I stream, they get DVDs. By separating the plans, Netflix has the opportunity to cut away at the plan sharing and cater separately to me and my parents.
"I think we're fully within our rights to complain."
Wait, what? You were violating their terms of service and you're complaining because they're raising the price you will have to pay to keep violating their terms of service? It's not like they're even threatening to cut you off.
I'm pissed they're raising my plan, but certainly you must have known you were getting away with something.
So between you and your parents a few bucks a month is a problem? Since it is clear you live at your parents house, are you aware of the cost of TV service?
I think I have a 'good' deal with DirectTV at $65 (and that only because of a promotion and only having 1 HDTV/DVR box and 1 regular HD box), and it's still 2x the cost of Netflix.
It depends on what you mean by "better." I have never once watched a Netflix stream without the movie's video freezing while the audio continues on. Usually happens at least twice, and "threatens" multiple times during a movie by the video jagging for a bit.
Amazon's pay per view streaming rental has consistently been all but perfect play.
So Netflix is better on price. Amazon is better on getting absorbed in the movie and not being thrown back into your living room because the movie stopped.
Youtube/Google's streaming rental quality is good, even great, except three out of the four movies I tried suddenly stopped and reported elapsed time as that the entire movie had suddenly been watched. Movie had to be started over, virtually ruining the experience. They did refund the rental fee without question.
> So Netflix is better on price. Amazon is better on getting absorbed in the movie and not being thrown back into your living room because the movie stopped.
For you.
I've watched hundreds of Netflix streams from 4 different states and a dozen internet connections over the last year and I can count the number of freezes on one hand.
Given that you have had a problem with both services, do you think the problem is perhaps with your computer/internet connection? I rarely have a buffering problem on Netflix and have never had the audio and video go out of sync.
I don't think they've cut costs at all. I pay them $9 a month now or whatever. I didn't spend $9 a month at Blockbuster before they existed, and I don't watch very many more movies now than I did then. Might even be less.
I do it because it's very convenient, not because it's a way to save money. I'll probably switch to DVD only from them now and actually start using whatever free streaming Amazon gives me via prime. The streaming selection sucks anyway, I probably watch more on Blu-Ray or stuff I torrent.
If you count 'movies I bought' + 'movies I rented from Blockbuster' they have cut costs for me. I didn't buy or rent many.
But that's not what it's really about. If you cancel your cable and get Netflix, you are saving bundles of money. I know more than a few people doing that, and I am so freaking close to it I'm not sure why I waste the money on TV anymore other than for ESPN & live sports. If not for that, I'd be long gone.
Depending on your ISP, you may have access to espn3.com. Most major sports leagues also offer online streaming packages for something like $100 for a whole season. They don't get you 100% coverage (due to local blackouts, games on TNT or other networks, etc.) but they get you pretty close.
You call it whining from entitled commenters, I call it
feedback from customers who are:
a) Having their subscription prices raised by up to 60%.
b) Being told so in a blog posting where that info is buried so far down it needs a snorkel to find the bedrock.
They just told me in an email, and I just canceled my subscription.
I didn't appreciate the way they did it: No explanation of why the increase is necessary, plus idiocy like: "Your price for getting both of these plans will be $15.98 a month ($7.99 + $7.99)." No package discount, and no consideration for having been a loyal customer for six years straight. No, just a form letter and a 60% price hike.
Their post-cancelation survey offered no way to indicate this change as the reason (and no free-form entry). Didn't they anticipate this? Maybe they don't want to know.
This makes me sad. I love Netflix. I'm not saying it's not worth $16/month, and I may even join again someday. But I hope a few million customers slap their corporate hand.
Of course they did. But if you raise costs by a X% and lose Y% of your subscribers, there are plenty combinations of X and Y where you make a boatload more money.
Users have valid criticisms here. Nothing in their post indicates that Netflix's costs have increased, so why would they hike prices by 60%? Why would you expect a positive response to such a move?
Their licensing costs. And even then, that's a proforma FY2012 guess from an analyst that's not affiliated with the company. It's worth asking if Wedbush Securities has a short position on NFLX.
This is a company that operates dozens of physical warehouses, employs thousands of people, and pays an astonishing amount in postage fees.
Their licensing costs are surely just a fraction of their bottom line.
According to Netflix's 2010 SEC filing, their operations expenses are around $400 million. Adding in development, marketing and general administrative costs, their total non-license costs were around $800 million.
They paid $1.2 billion in licensing costs. It's their most expensive cost, by far.
You've got that the other way around. In 2010, Fullfillment Expenses cost them 9.4% of their revenue, Cost of Subscription cost them 54% of their revenue.
> It's worth asking if Wedbush Securities has a short position on NFLX.
It doesn't look like they take positions themselves. They seem to be your standard financial services broker/dealer, in which case they do research for clients who take positions.
It's likely they have a "Sell", or at least "Hold", rating if they're writing negative notes. But that's as it should be; I think you have the causality backwards in your implication.
Netflix's subscribers have one valid complaint between cost or quality of content, but they can't complain about both.
As much as everyone thinks that Netflix is going to compete with cable, the only way to truly do so is to start getting first run, quality content and that costs money - boatloads of it. Netflix has gotten a pass for now since it was the only game in town but if they want to compete for your entertainment dollars they're going to have to spend some cash on quality first run content.
I give it less then 2 years before they start offering tiered plans - and maybe something subsidized via advertising. Its the only natural evolution of their model.
IIRC, their streaming costs were based on number of subscribers. With this plan, they ensure that only people who actually use unlimited streaming (and are therefore willing to pay for it) will be included in that subscriber count.
Netflix is free to set their own prices, and I am free to change my subscription (cancel or drop to streaming/dvd only). However doubling the price of something, and expecting no backlash is silly at best.
In addition they cut the cost and hassle of legal entertainment. With this change they have now increased the cost of legal entertainment.
I'm fine with them upping my costs, as their costs increase, but this seems beyond that.
I suspect it isn't just Big Content. I suspect they are sending more DVDs than they expected, and they have to keep up with costs.
This ends up not affecting me at all, though. The hassle of waiting for the DVD, and then shipping it back, meant that I only ever watch the streaming stuff. (I obviously wasn't a fan of movie rental stores.) And I'm already paying $7.99.
I feel like an entitled brat saying this, but fuck it, I'm moving to DVD-by-mail and ~torrents (or that old news service we're not supposed to mention).
Hopefully, we see more studios learning the lean business principles many of us have adopted in order to bootstrap.
Content costs should be reduced over time given current technological abilities, and there should be significant opportunity for up-and-coming talents to get on the screen with significant viewing audiences.
So you're saying that if a business prices their product too high, you should steal it instead and that this is ok because they didn't follow lean business principles?
I think there is a large class of people who have no moral objections to piracy. The only reason why they pay for something like netflix or itunes is because of convenience. That is, they are paying for the convenience, not the content. Therefore if the price goes up, and exceeds whatever value they are pricing that convenience, they naturally revert to other methods of getting the content (i.e. piracy).
So stealing is not ok because they didn't follow lean business principles--stealing was okay in the first place. It was just a happy coincidence that using netflix wasn't stealing.
I like how the OP of this comment thread is going to continue with half the service, and pirate the rest. Nice doubled standard on the morality of piracy. The thing is, pirating is more convenient than DVDs. Keeping streaming (which is more convenient that torrents) and then torrenting what isn't available on streaming seems to be the most convenient move.
This was in no way motivated by a moral consideration on my part. I do not see it in the moral context at all. This was an issue only because of convenience and ease of use for my significant other.
Okay, so here's a simple example. You can buy a sack of rice anywhere for $2. If you sell the same kind of rice for $200, do you think you'll sell any sacks? You'd go out of business, and deservedly so, right?
The interesting thing in Netflix's case is that the product is (content + convenience), but since the content can be obtained (illegally) for free, the customer sees only the value of the convenience. If you raise the price above what the customer is willing to pay, why would you expect the customer to pay it?
Now sure, piracy is an illegal act, but so is fraud. Yet insurance and credit card companies manage to sustain a working business model.
What pisses me off is that I was perfectly content with Blockbuster, but they broke Blockbuster's back and now I'm stuck with bad service no matter where I go.
Netflix's streaming library is weak, and now that Blockbuster has dropped store inventory and changed their rental periods, I have to watch a movie in a day in order to avoid a late fee.
Interesting. You are one of the few people who say they like Blockbuster. I am just curios, what did you like about Blockbuster and how did it (does it?) compare to Netflix?
I like that I can take a movie (after receiving it in the mail and watching it) to the store to immediately pick out a new one with my wife or my kids. It's instant gratification, and I don't have to wait for my best selection (usually).
Also, I get a free coupon every month for an additional in-store game or movie. My kids love this for games.
Lastly, you can now add games to your queue online, so it's like Gamefly + Movies.
I clicked Comments to say the exact same thing. They have access to thousands of films and whole seasons of TV shows and people are complaining because it's going to cost a little more. Unbelievable.
To be fair, it's not the first time Netflix has raised prices either. I'm paying much more now than I originally was and I was okay with incremental bumps. But this time they went about it poorly. And people are probably now realizing their prices are going to be raised on a near annual basis while their viewing habits likely haven't changed all that much.
I'd gladly go back to the older system whereby I was give X hours of streaming for my $X DVD plan. But the odds of me paying for a streaming plan on its own are quite minimal given the value of that service.
My problem with this announcement is they try and tell their customers what a good deal this is for them when it is obviously not good for them. It's a more expensive deal then what they currently have, if they had been upfront about it and said "our costs are going up due to content providers charging more for their content" or "in order to acquire more premium content for our streaming service we need to charge more" then I think people wouldn't have such an issue.
It's the worse deal + treating customers like they won't notice it that is the problem.
At the very least, it could have been spun as a move "to better serve our streaming customers with more premium content," which might have at least rescued the post from the level of "insulting."
I wonder how many Netflix members are also Amazon Prime members. I'm currently on a $15/mo 2-disc/streaming plan. But I also have Amazon Prime. I have the Amazon channel on my Roku and have checked out the catalog a couple times. At a glance, it looks pretty similar to Netflix. It never occurred to me to use it because streaming was included in my Netflix plan and I've already been using it for years.
I'm not so much bothered by the price hike. My price will go up to $20/mo. I'm not going to gripe too much considering how much I use Netflix. But now that DVDs and streaming are separate plans it creates a strong incentive for me to use Amazon Prime for streaming. I'm already paying for it so I can get the free shipping. Now I can change my Netflix plan from $15/mo (soon to be $20/mo) to $7.99/mo and get the same overall service. I wonder if they thought this through.
That was my first thought as well. I'll almost certainly drop my Netflix streaming entirely come September 1st, and just use Prime for streaming (also convenient because Amazon has a pretty good selection of newer/better content you can pay for, and this way I don't have to make sure I can play Netflix AND Prime on my home theater device).
On the other hand, my guess is that the number of Prime subscribers is tiny compared to the number of Netflix subscribers. So while this could be a great opportunity for Amazon to do something about that, I don't think Netflix has to worry about losing huge numbers of subscribers to Amazon as things stand.
I'm not sure how the streaming catalogs compare (and how they're trending relative to each other) but switching streaming over to Amazon Prime come September is certainly an option I'll look at. I buy a lot on Amazon and, while I've never felt that Prime was quite worth it, it becomes almost a no-brainer for me to switch from Netflix to Prime if I can get faster shipping with no minimum in addition to streaming for ~ the same amount of money as on Netflix.
TLDR: Netflix raises subscription cost 60%. The comments on the post are vicious.
They are duplicitous. DVD by mail is not a separate product. It is a workaround for the fact that they have failed to license their entire library for streaming. Now they have a perverse incentive to limit their streaming library to encourage people to pay extra for DVD service.
[edit] Now had they just said, "Hollywood is putting the screws to us, we need to raise our prices" I could respect that.
Except their costs for DVD services are a lot higher (hence it being more than a $2 add on). Netflix wants everyone to stream, but because they haven't been able to license and not everyone is interested in streaming (bandwidth and viewing location being two obstacles) they will have to keep the DVD side up for quite some time.
Maybe they didn't want to make their already-hostile business partners (upon whom they depend to stay in business) more hostile by steering the public ire at them.
I find the (dis)honesty of this post baffling. I understand that they want to increase prices, whether because of greed, licensing, or other costs - I don't care. What seems extremely dishonest to me is to say that this somehow benefits the customer when it just doesn't. People want streaming w/ physical DVD as a backup for things that aren't there on streaming. This, therefore, is just a price increase.
I pay ~100/month for cable. I've had a Netflix subscription for ~6 months. Since subscribing to Netflix, my girlfriend and I have watched less than 20 hours of television via cable. We maintain a cable subscription for pretty much the same reason people rationalize a landline phone (just in case).
Netflix can raise their prices about 10x before I'd even consider not renewing my subscription.
"But comparing Netflix to Cable is a bullshit comparison, the content on Netflix is way less" you might say. In theory, you are right. The content available via Instant Watch is way limited; and it has less newer content.
All I know is that since we've started using Netflix, I've stopped buying DVD's (I used to order 15-20 a week from Amazon), I've stopped watching the DVD's I already own (I have about 1000 sitting in giant plastic tubs in the closet that I never dig through), and I've stopped watching regular television.
They were mostly movies I'd already seen, and just wanted to have a copy of.
When I first started buying DVD's, I got it in my head that I didn't ever want to be in a situation like: "Oh, I feel like watching movie X, but I don't own it." Instant gratification.
I really think they could have done a much better job of framing the discussion around this increase. Talking about why they're doing it (not some B.S. about how "they really want to show people that they are committed to DVDs by mail") would have been appreciated.
Customers are not stupid. They see right through PR speak, and you can clearly see that in the comments.
I think your post nailed what's intriguing me right now: Netflix did a terrible job communicating these changes. It's odd to me to see such a large, well-liked company spend so much of their social capital (brand loyalty or belovedness) without better messaging.
For example, in an age where bundling is ubiquitous, I think Netflix needed to have a better explanation for why one service is being split into two and why there's no discount for joining both. Netflix needed to do a two-pronged approach -- here's what we're going to do for you, and here's what you're going to do for us. We all understood the latter (we're going to pay more), but nobody gets what Netflix is offering in return.
I don't know why people are complaining so much. The company did exactly what they should have - they hiked the price to stay in business and clearly informed their customers in advance. Evidently many people were abusing the unlimited streaming + DVD subscription before and it was not cost-effective for the company to continue to offer the deal.
Percentage-wise while it sounds a huge increase, it is absolutely nothing when you look at the real dollars. My cell phone bill is $100+, ISP is $70+, web hosting is $30+, and I pay $10+/month for many different web services (include many startups I found via HN). How is $8/mo for renting 3-4 DVDs a month too high? Sure, it was $2 before but you can't expect any company to make money on deals that get abused by more than a few.
I'd rather have Netflix charge their customers appropriately than go out of business or start nickel and diming like airlines or cellphone companies.
The pricing doesn't seem all that great. Take $7.99 per month for 1 DVD out. That equals to 8 DVDs rented for one of those DVD rental boxes in a grocery store (RedBox, BlockBuster) assuming you return them the next day. In order for you to rent 8 DVDs in 30 day month, you have to be getting new DVDs every 3.75 days.
So basically, in order for it to equal the cost of a comparable product, you have to get the DVD and watch it the same night, then ship it back and hope 2.75 days is enough for Netflix to ship you another one.
Don't know about others here, but I don't really get time to watch DVDs during work days. This leaves the weekend, so for $8 a month, I can rent 2 DVDs per weekend and receive greater amount of entertainment during a more convenient time.
So using your example of 4 DVDs per month, that's $2 per with Netflix or $1 (50% less) per with box rental services. So in terms of actual spending, you are still only saving 4 bucks (not even a cup of coffee), but % wise, you save 50%.
(and yes, I go to the store regularly, so I'm not counting cost of gas in this example)
Now, if they only had the latest stuff in the streaming catalog... that would be entirely different story.
I'm angry at them because their explanation is purposely dodging the real cause of the price hike.
I want to stream everything but I can't, so I still get DVDs. And since I still get DVDs they need to raise the price on me.
If they just came out and said "Sorry we don't have more digital content available." there wouldn't be an issue. Instead they are acting shocked I'm not satiated with their anemic online offering.
Bonus Fact: Netflix and Groupon have the same operating cost yet Groupon offers no physical or digital products.
I would argue that they did not clearly inform their customers. I found out about this through a post on Engadget, which led me to the Netflix blog. For a change as significant as this they should have emailed every customer. Unless they send out an email between now and then, I'll bet a large percentage of Netflix subscribers won't "discover" this change until they are suddenly billed 20% to 50% more in September.
Evidently many people were abusing the unlimited streaming + DVD subscription before and it was not cost-effective for the company to continue to offer the deal.
How do you abuse a plan advertised as "unlimited"?
I don't know about Netflix in particular (their TOS is pretty impenetrable), but it's pretty easy depending on what terms you agree to. What are their views on having me stream in San Francisco while my brother in Portland only uses the DVD queue? (Hypothetically, of course. My subscription is streaming-only but I'd be surprised if similar situations weren't fairly common.)
The really bad news: No more Unlimited Streaming + Unlimited DVD combines plan.
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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 for instance, our current $9.99 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, 1 out at-a-time (no streaming), for $7.99 a month.
The price for getting both of these plans will be $15.98 a month ($7.99 + $7.99). For new members, these changes are effective immediately; for existing members, the new pricing will start for charges on or after September 1, 2011.
So for folks like me, who have Unlimited Streaming + 1 Disc + Bluray, we've been paying $11.99 before taxes.
Now, we'll be paying $17.99.
That is a very significant increase and very unfortunate.
I don't begrudge what they're doing: Weaning you off your DVD habit and onto their streaming service.
But I just think they are jumping the gun. Get some more first-run content available first.
As it is, I'm going to take it on the chin and pay the extra $6, but with a lot less love for Netflix, for at least a little while until I forget about this.
"I don't begrudge what they're doing: Weaning you off your DVD habit and onto their streaming service."
Neither would I, if they weren't REDUCING the streaming service from my perspective. Dozens of movies on my streaming queue have disappeared before I could get to them - something I didn't mind so much so long as I could at least get the disc version.
General consensus seems: if pretty much everything were available streaming, fine - but it's not, and it's that "not" part which is small enough to make the DVD plan too expensive yet the content is personally important enough that we'll pay anyway.
I agree, I hate that. The nuts and bolts don't matter, bad service is bad service, but in case you're just curious, the reason that most often happens is due to their StarzPlay agreement.
A lot of the decent newer movies on their service come from their contract with Starz to stream any of the movies currently playing on that network.
Well, Starz only gets movies for a certain period (same as any other TV network). So when the run is over on Starz, it's removed from netflix as well.
This isn't the entire story, but I've found 9/10 of the movies that are removed from my instant queue are because of this.
I'm still considering the options, but the selection on Vudu is really tempting.
I actually think keeping the DVD by mail with netflix and using another streaming service will probably work best for me, most likely I will just cancel netflix before the change and pay for a month whenever I want a DVD I can't stream.
You may have to wait a day or two for ILL or movies to get to your local branch if they don't have what you're looking for right there. There's also going to be an online listing of movie that are available in the catalog, unlike most of the now defunct movie rental places.
This sucks. The streaming collection sucks even more. Every time I login the only titles being added are bottom rated movies and "Mock busters". Complete crap honestly.
It also looks like the meat of the customers are in these lower end plans.
I have no intention of passing Netflix on as just another cable bill.
Netflix brought this on themselves by including streaming in the plans for free to start with, which gave the message that this should be valued at $0. Now they want to charge $8 for that, and should not be surprised if there is a backlash.
at the very least, they could have thrown in some good news about how they are increasing the quality of each service by adding a ton more stuff to netflix instant etc.
Unfortunately their streaming catalog has just decreased recently as a result of ongoing negotiations with sony. All of this is probably in preparation for the fact that streaming rights are set to increase dramatically over the next 2-3 years
I think this is a horrible idea. I was actually thinking about upgrading my unlimited streaming plan to get the unlimited dvds option for $9.99. That price is such a good deal and I think it attracted a lot of customers because they were getting bang for their buck. But now that Netflix has announced this new pricing schema, I will definitely will not be doing so and I'm sure many customers are unhappy about this change.
For everyone complaining in this thread, I will remind them of the article from several days ago indicating studios have increased their streaming licensing costs from ~180 million to ~1.98 Billion.
If they think this price increase is enough to stay afloat, honestly, I'm impressed
They should have just canceled streaming. "Sorry we cannot provide you affordable streaming service at this time. You will continue to receive unlimited DVDs. Please send any comments or concerns to Sony Entertainment."
I wonder how many people now live close enough to a Redbox location that dropping the Netflix DVD service and going streaming + Redbox ends up being cheaper and affording of more DVDs/month.
Interesting point. Since Redbox is $1 a movie and the "1 movie at a time" Netflix plan is a minimum of about $.80 per movie, it really does make the two pricing plans pretty equal. The Netflix cost per disc goes up if you don't watch and return them as soon as possible.
On top of that, Redbox would let you get four movies on a Friday night to watch Friday & Saturday while Netflix would require you to watch movies during the work week (to keep the price per disc equal, at least).
To those who are unhappy that customers are whining, I'd like to offer some context:
The instant viewing section is almost unusable since they launched their layout redesign in early June. The only logical explanation for introducing such a poor UX is to restrict users from accessing content in the first place, to reduce costs.
There continue to be a substantial number of complaints following that redesign, to which Netflix never adequately responded. Now they are raising prices on an already reduced customer experience. It's possible that Netflix could have gotten away with raising prices (with a reasonable explanation for doing so), but this change is happening in a broader context where Netflix is essentially taking its customers for a ride.
I suppose I could be completely wrong. The redesign might offer a wonderful experience that somehow I can't grasp. But that seems unlikely.
If it's a price increase because costs went up, then say so. We might not like it, but we'll understand. Don't spin it to pretend that they're doing something for our benefit.
The oddest part to me about this pricing announcement is that the company announces a new set of plans, but only mentions the price of just one option in the announcement - the one in which prices are rising the highest (1 dvd at a time plus streaming).
I am currently paying for 2 DVDs at a time plus streaming, for $14.99/month. According to the recently updated Your Account page, this will cost $19.99 in a few months, a price raise of 33%.
Not as dramatic as the rise mentioned in the announcement - so why not mention that? Why make me hunt for how much other plans will be changing?
I feel like this is a chicken and egg scenario between big media wanting more for their content and consumers wanting a better selection of first run movies via streaming. Netflix (at its current pricing structure I assume from the comments here) can't afford newer titles however people want a better selection in the streaming section. One's gotta give and I feel like they chose to go with letting the customer pay more in an attempt to secure better streaming titles. Unfortunately in the climate of hearing about monthly caps from ISPs I don't feel like it was the best choice. I am going to go back to physical medium, and somewhat debating if I even want to continue that. $12 is 3 decent titles from a console service or Amazon a month. A la carte will win the day.
Contrary to what you've said here - I've never been a fan of a la carte pricing. I want the unlimited plan. When I get home from work - I generally have netflix on in the background with some documentary or other while I do housework or hack on stuff - same as I'm going to sleep. I probably play 3-4 titles every single day. Clearly a la carte pricing would not be a viable option for streaming 90-120 programs a month.
My use case is very similar and, as such, I agree with you. Unfortunately, given unlimited plans, heavy usage like ours tends to be subsidised by people who aren't anywhere near the average usage but still pay the same amount. I'm generally in favour of such subsidies (even for services where I'm an underutiliser), but I don't believe this to be a popular opinion since it's "unfair".
I appreciate the overall disturbance in the rental and cable industry that netflix pulled off, but as a canadian ex-customer, this will not get me back. In fact, it still feels like a liability when you couple a really bad selection with our shitty bandwidth caps.
This was a botched attempt at spinning bad news into something else. If the message was more forthcoming I suspect there'd be a lot less ire. I'm unlikely to opt for a streaming+dvd plan. Hey, maybe I'll get some stuff done around the house!
By looks of the comments I guess people don't understand if Netflix streamed everything they offered on DVD then A) Cable TV business model would crumble bringing down billions of dollars or B) It would have to be as costly as cable TV.
Netflix streaming is great and it's turned this once illegal downloader into a consumer.
Im sure in the future they will offer high priced streaming plans that offer more, but of course not too much more. Understandably Hollywood does not want to cut off a huge revenue stream and all of us entrepreneur are smart enough to know this ... the general public not so much.
Even at that price it's a steal. It should be at least 5x more. I really don't see how netflix pulled it off with content providers, they must have a really large user base i guess. Also, I've seen a lot of people talking about "money grab" - consider that entertainment production is a REALLY expensive sport, with each product considered a startup in its own right. Lots of them aren't successful and tag along their successful brothers.
I'm on the "unlimited 2-at-a-time" plan 'cuz my wife & I have separate queues (sappy romantic comedies vs. sci-fi action).
BIG QUESTION: how will Netflix handle the distribution of rather large queues now? We've spent quite some time assembling three queues (2 DVD and 1 streaming) totaling some 400 movies, and will be quite cheesed off if 2/3rds of it disappears just because the service provider encouraged/forced us to switch plans.
I'm guessing that if you backed up the queue that's about to be eliminated -- by saving a copy of the queue page to disk (as HTML, PDF, etc.) -- it would take you about an hour to reenter its contents into your remaining queue. Annoying, but survivable.
I'm pretty sure they're just passing along the licensing costs, but as little content as I consume, this is just pushing me towards iTunes where I can outright purchase what I want, with a little more 'ownership' rights and still spend roughly the same amount per month.
For heavier consumers though, $16 + a cheap Netflix streaming device is still a steal compared to satellite/cable and movie channels.
Missing the point. Netflix has sizable gaps in their streaming that are only filled by the DVD plan. Filling those gaps for $2 is a lot more reasonable than $8.
No, I get the point. The services are not equal in terms of catalogue depth. They're also not equal in terms of viewing volume.
If I used the DVD plan to fill those gaps, I would be annoyed too. But I don't, I only use streaming. I suspect the majority of users were either overwhelmingly streaming or overwhelmingly DVD oriented. The cost to fill the gaps for those users wasn't adequately covered by the $2, and since they were the minority, they put a wall between the services.
My point was, I still perceive $7.99 unlimited streaming as a great value for the product. Gaps and all.
Pricing gripes aside, by packaging DVDs and streaming separately, they'll have much clearer signals about which one users really want, as measured in dollars.
I'm assuming they'll be watching the numbers for DVD rental drop until it no longer makes business sense to offer that service.
Just to be clear, this affects ALL levels of membership, not just the low-end ones that are constantly being referenced. My (once standard) 3-at-a-time plan is going up to $24 in September.
Well maybe Zediva the video on demand service that puts DVDs in physical drives and streams them will actually stand a chance of being profitable. There was some discussion on HN about it here:
They just doubled my subscription price, for the exact same content. So, I would pay another $8 for streaming content that is mostly old, and often mediocre. It's like having TBS streaming to your PC. On top of that, their encoding is often lousy, and there's no separate way to report it.
I think it threw away that chance and left the door open to a lot of these "entitlement" type comments that harp about how Netflix used to charge $8 per month and can never ever change that. Ever.
I for one, plan to stay with Netflix and opt for the Streaming option as long as it makes sense. As for DVD/Bluray, I will go to my neighborhood Redbox.
Blockbuster? You, I havent yet gotten over the $4.99 rental fee, so you stay in the shit list for a little while longer.