Netflix Faces Backlash Against Price Increase

by Jeff Wiener on July 14, 2011

The rage and fury felt over a price increase from Netflix could be felt as a hot burst of energy from the United States. Few things generate such fury from Americans, but the announcement that Netflix was raising rates let loose the hounds of hell.

Currently, Netflixers spend $9.99 a month for unlimited access to movies, TV shows and content streaming online. Included in the $9.99 price is one by-mail DVD per month.

The new plan is $15.98 per month to include the same as above. For $7.99, customers can choose one or the other.

The point of such a move is to shove customers away from DVDs and toward online streaming content. “We went from being an ultra-extremely good value to an extremely good value,” said Steve Swasey, Netflix vice president of corporate communications. “It’s $6 a month. It’s a latte.”

The truth is that there are a lot of expenses related to DVD by-mail operations. Damaged DVDs need to be replaced and there are associated inventory costs to contend with, costs that Netflix doesn’t have to endure on the streaming side.

Theoretically, this could be a very good deal for some customers. Unlimited streaming is $7.99; unlimited DVD rentals in the mail are $7.99 (one out at a time, mind you). Only those customers who want both services will spring for the new price.

Alas, the customers were less than enthused. By Wednesday night, Netflix’s Facebook page had filled with 50,000 dramatic comments expressing outrage. Many customers, tongues out presumably, informed anyone who would listen that they had already ditched the service. Others bemoaned the “greed” of the move, doubtless forgetting that Netflix doesn’t exist to merely service individuals with movies.

The hash tag #DearNetflix was a trending topic on Twitter as more customers voiced their displeasure.

The six dollar increase certainly touched a nerve, but there were some suggesting that it was “the way” Netflix announced the change that mattered. Apparently a song with soothing music and a massage was preferable to an email notification. Others preferred a staggered increase, something more gradual so that consumers “wouldn’t notice.” Sure.

Nevertheless, the move will go ahead. People will threaten to leave Netflix over the increase. Some will, but many of the company’s 23 million subscribers will not. And the markets appeared to approve, with stock rising $7.46 on the day.

It has been said, rightly, that Netflix’s pricing model, especially in the realm of by-mail DVDs, was unsustainable. This move aims to change that, giving the company more shelf life and, with any luck, a wider range of selection and services for its customers.

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Written by: Jeff Wiener. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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