Thursday, July 14, 2011

Why Netflix Raised Its Prices

Why Netflix Raised Its Prices, Pogue article.

Not surprisingly, many people are very p*ssed off at a sudden 60% price increase. But really, I've wondering all this time how the hell they did it, who at this time can make a profit at a virtual streaming all-you-can-eat buffet of movies for only ten bucks a month (Though it doesn't included new hit movies)?

Maybe it was just a bait-and-switch operation, done clumsily. Maybe they never had planned to stay at the ridiculous $10 price for long. Or maybe they had not, somehow, seen that it would be much more popular than the DVDs and not profitable in the long run.

In any case, this is (was) just the kind of pricing which makes us Europeans look with envy at the US sometimes.
(Then sometimes not, as in mobile service pricing.)


Cado said...

I believe the price increase has something to do with a change in contract with the major movie studios. In short, Netflix's costs have gone up so they have to pass it on to remain viable.

Anonymous said...

I bet their profits plummet but at least as much. No one is going to bother with it now. Some people whose conscience bothered them thought that instead of illegal downloading "I can stand to pay $10 a month." Now they'll go back to getting it for free.

Ken said...

Looks like a fairly common occurrence in business. They guessed that people who take the combined DVD and internet wouldn't use the service that much more than either alone and price accordingly. Then they find out that their use is a lot more, so they have to raise the price.

Cado said...

So having just now read the article itself (can you tell I'm American? ;) ) I realize what I said before is irrelevant. It's nothing more than a simple cash grab by the looks of it, though it's not nearly as extreme as a lot of people would make it out to be.

$8 a month for DVDs or for streaming more than worth the asking price, especially if it means not getting a letter from your ISP. $16 is a pretty substantial increase but it's not life altering. It's not like a $10 service is suddenly unaffordable with a few more tacked on, and if it is you should probably get a few things in order before you worry about which movies you'll get in the mail.

The issue (as stated in the article) is how they're handling it. Customer goodwill isn't something you sacrifice without a bloody good reason. Of course, this probably won't do anything to them long-term. I imagine you'll hear a lot of grumbling but a few months from now no one will remember it, but it's still troubling to think they'd act with such abandon. Not surprising, given how a lot of major companies operate, but certainly troubling.

I don't know, maybe honesty is better than having them pretend they care when they don't. The fact that Steve Jobs is smiling at me doesn't make it any more pleasant when he bends me over, and there's no way we can be more than just names and numbers to major conglomerates. It comes down to what we're willing to take and what we're willing to pay, both in terms of cash and dignity.

eolake said...

Quite so.

It's remarkable the extremes of grace and clumsiness companies can display with difficult changes.

It's true that it's really not a big hike when you look at it. They should at least have pointed that out from the start. Or done something else to sugar the blow or soften the deal (as it were).

Anonymous said...

Steve Jobs...smiling at me...when he bends me over

You've just described Eolake's favorite wet dream.

Miserere said...

I have the $10 1 DVD + unlimited streaming contract. I received that Netflix e-mail and was royally pissed off. It wasn't so much the price hike as the tone of the e-mail, which I will summarise like so: We're going to do you a super favour and raise your price 60% by dividing up the services we offer; aren't we just so NICE?.

That's no way to raise your prices by 60%! If they are being squeezed by the production companies requesting higher royalties, let us know! If they are having to upgrade their systems and buy tonnes more storage space for the extra titles, let us know! If they're upgrading their cable service because of the increased streaming, let us know! If they've hired 2,000 people to improve their overall service and get DVDs out quicker, let us know!

They didn't give any reasons.

At the very least, I will cut out the streaming, because it is not worth $8/month for me (the available film and series titles is not a large enough selection), but I will most likely cancel my contract altogether because I don't like being treated like an idiot.

Best case scenario, Netflix loses $2/month from me (and my streaming wasn't costing them that much); worst case scenario, they lose $10/month, and I will make sure to never recommend them to anyone.

Congratulations to Netflix on f**king up a perfectly good business.

PS: I haven't even read Pogue's piece yet, so it hasn't weighed on my decision.

TC [Girl] said...

Apparently, Netflix doesn't seem very worried, yet; they're still growing (although the article title claiming 2 MILLION peeps walking kind of grabbed me! lol!) and wanting to get rid of the DVD "slough!" Can't say I blame them; ALL that unnecessary postage and employees to deal w/the dang things! Streaming sounds much more efficient, business wise, and, of course, let's not forget the ever-glorified fucking shareholders: they would want overhead cut to nothing, like the rest of the job market!