December 19, 2014

Why are you Surprised about the Netflix Rate Hike?

Image Credit: Wired

There has been a tsunami of hate that has been flowing towards Netflix with their announcement that they will be raising their fees on rate plans that include both streaming and DVD’s in the mail. In essence, Netflix has doubled their fees if you want to both stream and receive DVD’s as well.

I have read post after post, comment after comment blasting Netflix about this decision. People saying that they are leaving the service, that they have had enough and taking their money elsewhere. (Where might I ask?) I have seen people say that Netflix’s timing is bad because the economy is struggling.

My response? You are all insane to think that this was not coming.

Let’s take a look at the current state of affairs of content providers.

Blockbuster way overextended themselves with store openings, sinking themselves in debt with over saturation of brick and mortar in various cities. When I lived in Overland Park, Kansas, I literally had 4 Blockbuster stores within a mile of my home. Way too many, and way too much overhead for Blockbuster to maintain. Now, their mail-order service in my opinion was way better than Netflix. You could get two movies out at a time, then while you were waiting for new ones to come in the mail, you got coupons on your envelopes to go to a physical store and get free rentals. Pretty sweet! The problem with this model? The Blockbuster revenue model was built to rely on late fees, just like credit card companies. The company relied on people’s laziness to make money, and honestly, it worked for a long time. But then comes Netflix with it’s no late fees and pretty good catalog and amazing mailing times. The real beginning of the end for Blockbuster was when it did away with late fees, thereby killing it’s main line of extra revenue. Blockbuster being a persons main source of renting is now a thing of the past, being relegated to the newly released Blockbuster Express boxes that are competing with Red Box.  Did Netflix kill Blockbuster?  Yes, in a way, but Blockbuster’s CEO did that as much as anyone else with his rapid expansion plan that was way too aggressive.

Red Box is a great alternative, but you still have to physically go to a Red Box to rent a movie.  Now, for $1.00 you get a great value, and Red Box shows that companies other than Apple and Amazon are finally understanding the “Long Tail” economic model.  For my family, the closest Red Box is ten miles away.  If you live in a densely populated area, Red Box is a great alternative, but in rural settings, it simply is not yet.

Amazon offers movie rentals through Blu-Ray players and Roku boxes, which is very handy, but there is no all you can eat option.  The upside is that they do have the latest releases for rent and purchase via streaming, but they can be a bit pricey in my opinion.

Hulu?  Never used it.  Too much of a pain in the rear end.  Hulu-Plus?  Yeah.  Right.

So that leaves Netflix, who offers an all you can eat plan for streaming movies.  Albeit, a limited catalog for blockbuster releases, but a solid catalog for television shows that I would otherwise not get to see.  Also, they have an extensive children’s library for my kids to watch.  We have recently turned off our satellite television and gone strictly to netflix and movie rentals.  My kids have been happy with what Netflix offers.

Now, no one likes paying more for a service they are already getting, I concede that point.  But honestly, are you using Netflix for DVD rentals?  Does someone else offer an Android app (albeit limited and in need of hacking to get to work on most devices) that you can watch content on your tablet or mobile device?  We have not gotten a DVD from Netflix in almost a year, mostly because it is simply easier to pick up a current release when we are in town, or wait until one of our friends lets us borrow theirs.  I take issue with a lot of the outrage out there, because it simply does not make sense to me.

Bad economic times?  Guys, this is $7.99 a month we are talking for streaming content.  If this fee is stretching you, you have MUCH bigger problems than Netflix raising prices.  You spend more than that at Starbucks for their overpriced, burnt coffee from a hipster barrista.

Bad online catalog?  This one has some traction, but you need to look at the television series offerings which for Netflix is one of their most watched segments of their business.  They are deep, and have a lot of the hit series that are shown on pay TV.  Dexter, Weeds and others are on there, and are kept pretty current.  Heck, I watched Emergency from the 70’s the other day.  Pretty sweet.

I think people need to stop knee jerk reacting to this announcement and crunch the numbers of what they are actually spending a month on content rentals. For online streaming and one out at a time rentals it costs $15.98.  $6 more than the current $9.99 plan that includes both of those things.

Go back and look at your receipts for last month.  How many movies did you get from Red Box?  If you are like the rest of the country, you are averaging three rentals at a time, so you are halfway to the new rate hike already.  That leaves $3.  Rented a movie from a brick and mortar store last month?  Rented off the Apple store, Android Market, Amazon?  There is the other $3.

What people are upset about I think is that Netflix is taxing people’s convenience.  If someone does not want to wait for a new release that they really want to see to come in the mail, they run down to Red Box, because they can do both.  Netflix is trying to make it so that they are the one stop content provider out there.  Because really, is there anything else that really offers what Netflix does?

You will argue that yes, yes there is.  But really think about it.  Really crunch your numbers.  Couple that with the fact that as a Netflix customer you have helped to crush out other services like Blockbuster by mail.  The market has decided that Netflix is the victor, and to the victor goes the spoils so to speak.

Cancel your membership, by all means.  It isn’t going to hurt Netflix one iota.  Do you know how many devices are coming out with Netflix installed?  Blu-ray players, computers, Android devices.  You name it, you can get Netflix.  Their attrition rate is going to outstrip cancellations.

I am not trying to criticize you for your hate of a rate hike, I am just saying that perhaps it is a bit misplaced.  Think through the issue logically, and you will see, I think, that perhaps this makes sense for what you are already doing.  For my family?  We are going to stick to streaming only.  It makes sense for us.  Think it through and let me know what you think in the comments.  Let the flaming begin.



  • Omer7979

    Dude. Don’t make it so obvious that you have some kind of stock in Netflix… The money hungry corporate juggernaut will spin a good thing into a control thing soon. Competition will cure the greed addiction that consumes Moneyflix…

    • Anonymous

      Turncoat. Compared to the alternatives of cable companies, etc. Netflix has always been extremely well-priced. Do you know all the facts? Perhaps their new contracts meant higher rates they were paying, and that “free service” of streaming they once offered now needs it’s own pay model.

      Where’s the control you speak of?

  • Jlroesler

    Agreed. I look at this as a decrease in my monthly fee for streaming. And it’s still a bargin if you want both. People need to understand that streaming was added as a free add on to the DVD service.

  • http://www.facebook.com/people/James-Seagle/100000885486648 James Seagle

    This will just drive more people to torrents.  I gave up on these services long ago due to price and availability.

    • Anonymous

      So they drove you to stealing.

      How nice, blaming others.

  • http://www.facebook.com/people/Ron-Chusid/100000217297542 Ron Chusid

    “Amazon offers movie rentals through Blu-Ray players and Roku boxes,
    which is very handy, but there is no all you can eat option.”

    Amazon does have an “all you can eat option.” There is unlimited free streaming of many of its videos for members of Amazon Prime. The selection is not as good as on Netflix, but it is less expensive (plus I already had joined Amazon Prime before it began offering free video streaming for its other benefits). I have also found some movies available for free streaming on Amazon that Netflix only had by DVD. Amazon might be an alternative for people who primarily use Netflix for DVD’s but want a less expensive way to stream movies and fell compelled to protest to Netflix by purchasing both a DVD and streaming plan from them.

    $2 was an unrealistically inexpensive price to offer DVD’s by mail in addition to streaming, but I think that Netflix would have seen less protest if it had increased this price but still offered adding DVD’s to a streaming plan at a lower price than an entire new DVD plan. They probably thought that offering a less expensive DVD only price would help, but to subscribers it still feels like being charged double to get both plans.

  • Anonymous

    “Their attrition rate is going to outstrip cancellations.”

    Huh? Netflix is going to be fine because the rate at which they lose customers is going to be larger than the rate at which they cancel the service? I know I’m tired, but damn, this makes no sense to me.

    Also, I think you’re misconstruing why people are upset. The objective value of the increase may not be all that much, but the percentage increase is quite large. I don’t get why Netflix didn’t do this incrementally rather than in one fell swoop. It would have attracted much less attention, and the outcome wouldn’t have been much different.

  • Poopsie_4

    Insane?  What if your Rent or Mortgage went up 60%?  How about your salary decreases 60%?  What about food, lets kick that up 60%.  While we are at it, turn up all of your utilities 60%.  Its not the increase, inflation is going to happen.  Its 60%!  So what happens 9 months down the road when they kick it up another 30%?  Way too much in a very short time.  I hope they go under for this.

    • Anonymous

      When you’re dealing with small numbers such as this, percentages can be misleading. For instance, if your mortgage went up 60%, you’d be paying HUNDREDS more. In this case?

      6 bucks.

      Eat one less McDonald’s extra value meal a month.

      • Poopsie_4

        So when gas shot up earlier this year, no big deal right?  Its just the oil companies trying to make better gas for us?  I mean, we are only talking 40 cents per gallon.  So, one less cup of coffee per week right?  Nope, over 30 gallons it adds up.  Over one month, that adds up, over one year, that adds up.  $6 per month more = $72/year more.  Hey, we should let everyone kick up stuff 60%!

        • Anonymous

          Poor analogy. If Gas shot up 60%, that would be about $6.40 a gallon as opposed to the current $4. Since you don’t buy one gallon a month, that adds up to considerably more money a month. If you drove 1,000 miles a month @ 20mpg, that’s about $120 more a month.

          Which is a lot more than 6.

          I’m not happy about the raise either, but my point is that, with small numbers, saying “OMG 60%!!” doesn’t mean as much. If you’re going to complain, say $6 instead of 60%.

          • http://twitter.com/mashryock Mark Shryock

            The difference is if you cancel Netflix, you don’t lose your house or the ability to go to work.  Netflix is just optional entertainment and you are all comparing it to what is necesary to live.

          • http://www.facebook.com/keithandmissy Keith Vincent

            Gas is not necessary to live.

          • Patrick Bateman

            Neither is a mortgage.

  • Jaymoon

    Well it seems as of late (unfortunately) that we have become a society of complainers.

    The mindset is that if we complain about something long enough, we’ll get what we want.  The whole HTC unlocked bootloaders issue comes to mind…

    I’m sure Netflix weighed the pros and cons of raising their price, and the pros clearly outweighed the cons.  So a few people complain, and say they are going to leave.  OK, good riddence.  Netflix is doing just fine without them.

    I too, just like the OP haven’t received a DVD from Netflix in well over a year.  As soon as the “streaming-only” plan was announced, Netflix must have seen a HUGE number of users switch over to that (which I did).  Physical DVDs are a thing of the past.  If you want them, that’s great, they are still available.  But it seems that over Netflix’s life span, they are slowing phasing out the old-school ways of doing things, and look ahead toward the future.

    Also… ever wonder why they are called NETflix?  Talk about envisioning an idea…

    • Anonymous

      Mate,

      The last time I looked at netflix Facebook account they had 60,000 Comments regarding the new price. Call it as society of complainers, however this struck a chord with masses not just a few complainers. I would suspect if Netflix had better streaming options this would not be the case. Maybe if you could access all of Netflix content through the web this would be a non issue.

  • Brendan McCluskey

    “I am not trying to criticize you for your hate of a rate hike, I am just saying that perhaps it is a bit misplaced.”       

    …really?  –> “You are all insane to think that this was not coming.”

    Beyond your closing sentence being outrageously condescending, the article over all was Highly critical of people who have opposing views (some of your readers). The way in which you fronted each argument that you did (e.g. “Bad economic times?  Guys, this is $7.99 a month[…]”) was pathetically immature. 
    What annoyed me most is that your entire article circumvented around your own personal Netflix usage and used that as a touchstone of judgement. Speaking of pathetic, let me counter your provisional ignorance with a pathetic example. Do you think it’s fair to retroactively change contractual terms to such extreme on someone who actually fully utilized what they were paying for – someone who has no brick-and-mortar alternatives, such as the disabled or elderly? In the case of the disabled or elderly, he/she would have to purchase both the streaming and DVD plans to upkeep their current usage, nearing a price increase of >~60% with an added value of 0% from status-quo.

    You’ve also failed to acknowledge there being value in a streamlined, single service & interface… value lying in facets such as being able to manage both DVD and Instant queues simultaneously, being able to query your usage statistics from a single source, being able to be billed by a single source and manage a single account, etc.

    I may or not agree with you on some or all of your arguments; regardless, this article was poorly thought out and the writing was atrocious. Just so you know – I am OK with the increase so long as they’re able to reconstruct their film content agreements in an effort to  expand the stream-able content.

    -B

    • Anonymous

      Being a month-to-month contract, they can change the terms at any time for the next month.

  • Elvis

    Are they raising the steaming only price? If so, they better be supporting more streaming stuff in stead of the extremely limited choice they have now…. i’m not just going to willingly give them more money for NOTHING, and in all honesty you’re kinda naive and /or dumb if you’re perfectly willing to pay more for the same service just to satisfy some guys greed…

  • Gil

    I’m not surprised at the hike, I’m surprised that it’s not gradual.

  • http://tylerberens.com Tyler Berens

    “Hulu?  Never used it.  Too much of a pain in the rear end.  Hulu-Plus?  Yeah.  Right.”

    I know, right? I mean with Hulu, you gotta go on there, search for the episode you wanna watch and click play. And with Netflix it’s so much easier; you just have to search for the episode you wanna watch and click play. Of course, with Netflix you have to make sure you’re on a platform that supports Silverlight, but somehow that makes it easier.

  • JCAndroid87

    I switched my service to online streaming three months ago I knew it was coming allready. Come on people, you knew it was going to happen sooner or later just like with everything else like food, gasoline, taxes, etc…. I don’t mind paying the encrease bit I do want more content and being able to watch stuff on more devices at the same time.

  • Polaris1

    Keeping things in perspective it’s obvious that while no one likes any type of rate increase the return on investment one gets for netflix is still a great bargain and you’re getting your money’s worth. I can’t even get a large 3 topping pizza at my local shop for $17.

    Dollar for dollar netflix is still the best bargain in town. With streaming and one dvd at a time you could literally watch dozens of movies/shows per month. Not redbox, not amazon, not hulu plus will give you all that.

    This reaction is similar to people bitching cause an android developer charges .99 for an app and they think its a ripoff. Get a grip people & a clue!

  • ohmarni

    Well, you’re right. Nobody else is offering what Netflix does. That’s why they can get away with this rate hike, nearly doubling my cost. I chose to drop my DVD service. When a half way decent alternative option comes along, like many others, I will drop Netflix altogether.

  • Roger O’Dell

    I was not surprised by what Netflix did. I was one of the users who did DVD +2 and streaming. Did I quit, no, I just switched my plan to streaming only a few days ago. I will end up saving money in the log run so I actually will thank them for doing this. In the begining I use to really take advantage of the DVD side but I must say in the last 3-4 months, I have been holding on to them a lot longer than normal. Trying to find time in my schedule to watch a physical disk vs having a large queue of streaming material at my disposal is a no brainer.

    I just hope that now with this increase, they will be able to bring more new release content to streaming. I don’t know why they would be willing to agree to a 28 day period before a new release would be viewable by DVD or streaming when just about every other service has it as soon as it is released.

    I also hope they take this time to pursue reviving cancelled shows, especially when they will be putting out their own series soon.

    I also watch stuff on Hulu once in a while. I had an account with them long before they decided on that Plus option.

  • http://jay.askren.net Jay Askren

    You forgot some of the other alternatives to Netflix.  You can rent movies from Amazon, Google, and Apple.  At $4.00 a movie, I can watch much more for my money on Netflix.  The other alternative is cable/satellite tv which can be anywhere from $30.00 to over $100.00 per month.  If you want to save money in this bad economy, cancel your cable.  We did that a long time ago because of the ripoff it is.  

  • Anonymous

    I still get occasional DVDs from NF.  It’s not just a rate hike that bothers me.. it’s a rate hike very shortly after i found out many of the titles i had in my streaming queue are no longer available.

  • Tim Bennett

    They should have implemented a smaller $1 to $2 fee increase per year to gradually get people used to paying more.  Sort of like the Cable companies and cell phone companies do.

  • Bob

    First they posted a 55% increase in profits since last year.  They are not struggling in any means.  Second they want to push more people to streaming, which costs less overhead (they don’t need to store, ship and maintain a vast collection of DVDs anymore), but has the added cost of licensing from the MPAA.  Third, they are adding no additional cost benefit for the extra 60% increase.  Fourth, their streaming selection is out of date and sparse.  They neither has entire runs of TV shows on the streaming or are missing certain sections.  New movies are not present.  Streaming is not HD.  Fourth, the DVD section has more selection and newer movies, but the wait is an entire month after the release to DVD to get the movie.  Fifth, there is no other competition.  You can’t go anywhere else to get this service, so that is a monopoly.  Hulu, Amazon, Google, etc offer streaming but not the DVD selection.

    Why you ask am I mad at Netflix?  Am I getting rid of Netflix…No its $60 a year increase, and I like the service.  Don’t give me the excuse though that the MPAA is going to drag you through the coals next year over licensing fees.  You negotiators suck then.  Don’t tell me that profits will slump when your increase in profits is 55%.

    • Anonymous

      All good points! Nuff said!

  • Anonymous

    Not sure what this has to do with Android, and this is probably the last place in the world I’d come for insightful analysis of pricing structures and the like, but I’ll throw in my two cents anyway, which is this: There is more than “some” traction to the Bad Online Catalog point. Their online catalog is offensively bad. It’s complete crap.

  • http://www.facebook.com/carl.rodakowski Carl J. Rodakowski

    After 11 years, I’m done.  They have slowly but surely went from a giant to simply a utility that frankly, can be done better and faster.  The price hike was just the nail in the coffin for me.

    • Anonymous

      I am with you. Quite frankly ther re are other options and some better. Amazon prime +hulu plus just may be the answer.

  • rose

    Well I think that Blockbuster has just as much to offer as Netflix
    and with this price increase they are going to end up being cheaper. Right now
    with my provider/employer DISH Network you can get Blockbuster free for 3
    months. Now because of the price increase Blockbuster is offer Netflix
    customers a 30 day free trial with them. Check out this link for the DISH deal.
    http://bit.ly/iH7nwg With all the deals
    Blockbuster is offering right now, Netflix is going to lose a lot of customers
    with their price increase.

    fgdf

  • Mike

    I’m keeping the DVD rental (where I get DVD’s and BDs pretty much as soon as they come out). The streaming selection? If I’m *really* bored, having every bad made-for-tv scifi movie from the 70s, 90s and 90s available is nice, but for new releases – especially TV shows – Hulu plus is a better deal.
    Netflix has managed to get me to stop using their streaming service, and convinced me to spend the money on Hulu Plus.

    • Anonymous

      They win. In the end you still give them your money.

  • Anonymous

    My issue is not that they raised rates, that really was inevitable, but that they did it by 50% all at once. Make that incremental over a few months or so. Also, on the same week, they removed three to five items from my queue as no longer available, including a series I was a season and a half from completing. That stings.

  • Buckgeisster

    It’s effect on me was to cause me to drop my dvd subscription. So fewer net bucks for them. I am surprised since they were growing their brand so far as I could tell.

  • http://twitter.com/swcowger William Cowger

    I think Ray Walters needs to shut the fuck up. This is bad business and everyone knows it.

  • http://twitter.com/TurboFool Jarrett Kaufman

    Actually, Amazon DOES have an all-you-can-eat option. Just buy Amazon Prime and you have free access to their entire video library.

  • Jason

    I think Netflix is trying to drive everyone to the streaming side, maybe they are in league with the internet providers and their caps on our bandwidth. They will get at out wallets anyway they can. Now even though Blockbuster did really go nuts with locations, I was the same as you, there were 4 or 5 withing a 4 mile radius of my house, it was like the blue and yellow shirt people were taking over. But their mail service has come into its own, and they went nuts on the specials trying to get some of the 2/5 million people expected to cancel Netflix when the rate increase goes into effect in September. Working at DISH I see all the news stories on the net about Netflix, and I still find the backlash almost amazing. Looking at the actual price it didn’t seem like that big of an increase, but everything does come down to the percentage, and 60% is a bit steep. They like their product. Blockbuster even put out a good offer to DISH subscribers, 3 months free of blockbuster by mail you can check it out at http://bit.ly/m8kwjf

  • Beholden

    Ray – thanks for lightening my day with your comically antithetical misuse of the term “attrition”.  I also got a kick out of the juxtaposition of your tenuous grasp on the English language with your ostensible occupation as an author of sorts.  Classic.

  • my283

    coach purses outlet I am happy day!
    coach outlet online Because you’re behind
    nike heels In my most beautiful years to meet you.
    coach factory outlet We should treasure now.
    nike dunk high heels The new one has been opened.
    coach factory outlet Remember do it for yourself, then complain.
    motorbike clothing Think of a person to change a journey
    nike heels australia Miserable in the heart die
    motorcycle clothing Would you just being think I am.
    superdry outlet I want to love will always stay in your heart

  • http://profile.yahoo.com/K2B5OEMGQV37CKMJ265AWMH3FM Jodie

    superdry sale To be a happy person.
    coach factory outlet We will do better
    nike high heels Without you I was lonely.
    coach outlet online I believe his heart.
    air max tn Miss a friend and warm greetings.
    coach outlet store Only the smile is not tired.