Policy Change in Netflix

[EffEmDoubleyou]

I have no idea what the movie studios are doing in terms of raising their own prices to NetFlix.

Let me assure you, in the last year Netflix's content costs have skyrocketed. Pretend you went to the grocery store tomorrow and a loaf of bread cost $15. That's what it's like to be Netflix right now. The current cost is likely a much more "true" cost, and this content was undervalued before. But it's still a lot to absorb.

 

[Totenkindly]

Let me assure you, in the last year Netflix's content costs have skyrocketed. Pretend you went to the grocery store tomorrow and a loaf of bread cost $15.

Well, my loaf of bread did not cost me $7.99 in the past. A comparable example is saying my $2 loaf of bread costs me $3.99. (Which is still within range of more expensive breads, actually.)

That's what it's like to be Netflix right now. The current cost is likely a much more "true" cost, and this content was undervalued before. But it's still a lot to absorb.

I understand all that. I'm thinking more big picture, and the cost overall is still pretty low in comparison to what you're getting. I remember paying $4 for a stupid VHS tape to Blockbusters, so for the price of less than 4 movies I'm still getting unlimited streaming without late fees, which seems a remarkable deal to me.

But the gas situation might feel similar... the US typically pays under what Europeans pay for gas, although we're more spread out. So maybe $3.65 seems not too much in comparison, more "on par," but to me it's still an atrocity since I remember finding gas stations for $1/gallon even back in the early 90's or so, and under $2 for many years after, I think.

 

[EffEmDoubleyou]

Well, my loaf of bread did not cost me $7.99 in the past. A comparable example is saying my $2 loaf of bread costs me $3.99. (Which is still within range of more expensive breads, actually.)

In my example, Netflix was "you", not you. (Now this sounds like an Abbott and Costello bit.) They were the ones going to the store to buy content. And $3 to $15 is a pretty accurate ratio of how their costs have spiked.

 

[Thalassa]

Well, my loaf of bread did not cost me $7.99 in the past. A comparable example is saying my $2 loaf of bread costs me $3.99. (Which is still within range of more expensive breads, actually.)

I understand all that. I'm thinking more big picture, and the cost overall is still pretty low in comparison to what you're getting. I remember paying $4 for a stupid VHS tape to Blockbusters, so for the price of less than 4 movies I'm still getting unlimited streaming without late fees, which seems a remarkable deal to me.

But the gas situation might feel similar... the US typically pays under what Europeans pay for gas, although we're more spread out. So maybe $3.65 seems not too much in comparison, more "on par," but to me it's still an atrocity since I remember finding gas stations for $1/gallon even back in the early 90's or so, and under $2 for many years after, I think.

In the Southern states as late as 1998 or 1999 you could get gas for less than one dollar per gallon, in fact it was cheaper in the late 90's than the early 90's. I remembered it being this way when I first learned to drive, and I checked a spreadsheet of stats just to be certain, and yep.

I wonder how much money Netflix has lost with lost and damaged DVDs. I'm sure this is behind the raising of the price, that and the sheer accessibility of it.

 

[Totenkindly]

I wonder how much money Netflix has lost with lost and damaged DVDs. I'm sure this is behind the raising of the price, that and the sheer accessibility of it.

That was one of my guesses. I have a friend here who I knew sat on a DVD she got for months, it was kind of funny.... but yes, eventually the DVDs go out of circulation. I wonder what they pay per DVD since they're in bulk.

I do RedBox a lot too, for recent movies. Their $1/$1.50 BR model is pretty decent; I'm not sure how much of a hit they'd take for raising rentals past $2. Right now. $1 is about right for a movie I just want to have for one night and it's low enough I'll watch something I'm not sure I'll like.

 

[Tallulah]

I was annoyed by it, since we had the streaming + 1 dvd plan. Our plan would pretty much double in price. I get it, because Netflix got a deal on a lot of their streaming content since the digital market was so unknown at the time, and they're having to pay the piper. But probably what will happen is we will keep streaming and cancel dvds.

 

[lowtech redneck]

But probably what will happen is we will keep streaming and cancel dvds.

That's what I'm going to do, I never really used the DVD option anyway (too impatient). So long as the streaming-only plan is less than the current combined plan, this actually works out best for me...but I agree with others that they will probably increase the price of streaming very soon.

 

[Snoopy22]

I always believed the best way to keep yourself in business when you lack a monopoly is to upset your customer base. We dumped them years ago when they raised the 3 DVD rate from $16 to $18, it was a better deal for us to use the money spent on them to buy from the surplus of used DVDs on the market.

 

[Giggly]

Got this letter from Netflix after I cancelled DVDs.

Dear J***

I messed up. I owe you an explanation.

It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

For the past five years, my greatest fear at Netflix has been that we wouldn't make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldn’t have changed the price increase, but it would have been the right thing to do.

So here is what we are doing and why.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.

So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.

There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the Qwikster.com website is up and ready.

For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

Respectfully yours,

-Reed Hastings, Co-Founder and CEO, Netflix

p.s. I have a slightly longer explanation along with a video posted on our blog, where you can also post comments.

 

[JocktheMotie]

Haha. I want whatever Reed is having.

 

[Spamtar]

^this letter sucks. They didn't even include a "free offer" to entice or to placate their veteran members.

Netflix is still a deal but the business/psychological response they induced in their customers is bad business. When a person/business/organization takes something away from a person, the person will get emotionally upset. Unless they are able to able slowly take it away (slippery slope) or able to offset it with another emotion or to allow them a "choice" which doesn't appear to be an unequivocal taking than people will get resentful and take their business elsewhere (or revolt/seek to punish).


For example the reason most people don't go up and arms about losing their civil liberties is because they are taken very slowly. In those instances when they are not taken slowly the alternative manipulating tactic is implemented counterbalancing emotional stimulus to offset the angst of loss/cost (i.e. 911 and the Patriot Act). Tossing in some confusion or obfuscation also seems to help.

 

[Qlip]

I can see why people are pissed. When I signed up, I signed up for the streaming only, so the change didn't effect me that much. I understand from reading several articles that Netflix was originally founded to be a streaming content provider and their DVD business was intended to only be interim, so I guess by their standards this was the logical next move.

I hope somehow this helps in negotiations with the content people. I'm bummed that they lost Starz, and it looks like every studio wants to be Netflix now. I'd prefer to have only one place to go.

 

[LEGERdeMAIN]

I don't think this is such a big problem. Netflix fucked up and now they're fixing it. I think they should've made each service $5 to begin with so that any increase would seem LESS BIG. I blame the people who use the dvd service for the increase, mostly because they're poor so they don't know how to take care of things properly. I have a netflix account that's been deactivated for the past three months and I only use streaming. If I want to download a movie to play somewhere where I can't get a connection(where would this be?) I would just use torrents.

 

[TenebrousReflection]

When they first announced the price increase I heard about it second hand from a friend and I was initially outraged, but then I decided to do a bit of research. The end result is that I'm still quite displeased with the price increase (if the economy were not as bad as it is, I would probably be a lot less bothered by it) but on the basis of my preferences, netflix is still a competative option.

Most of my comparison list was science fiction, comic adaptation movies, crime drama, and BBC shows and movies with a some action, comedy and anime for variety. I compared Netflix to Blockbuster, Amazon Prime and Hulu+. I did not include redbox, as I often rent a movie and wait for a week or more before I'm in the mood to watch it so their business model does not work for me.

These were my conclusions from the research.

Netflix streaming selection is still inferior to its DVD selection, however; it is still better than either of the other unlimited streaming options. Amazon Prime's main selling point is free shipping on all Amazon orders of any cost, so the streamign is just an additional benefit, but they do have a respectable selection of BBC and PBS content. Hulu Plus's selection is downright dismal if your viewing preferences are anywhere close to mine

If you don't mind gettign stuff on a per rental deal, Amazon and Blockbuster offer streaming pay per view (with stuff not availablle on Prime) for about 2.99 to 4.99 depending on how recent the title is, but you have a narrow window to watch it in. Even tho I only watch a couple new movies a month, I don't like the narrow time window, so its just not an option that works for me. Some of the new relases can be purchased on Amazon for as low as 9.99 which is a more tempting option. The other thing I don't like about any streamed content is that they are not yet including the director comentary tracks and other bonus feature, but Netflix is also starting to move to stripped down DVDs that omit those features too.

Blockbuster has a decent selection of TV shows (not quite as complete as Netflix), and a slightly better selection of movies - some movies like Suckerpunch are available sooner on Blockbuster than Netflix. Blockbuster does not diferentiate between normal DVD and Blu-ray pricing, so if you don't have a Blu-ray player (which I do not), then Netflix is stilll cheaper for DVDs, but that savings has the cost of waiting longer for new releases. For those with Blu-Ray, I would recomend Blockbuster if you watch more movies than TV shows. If you don't have Blu-ray, you can still go with Blockbuster to send a message to Netflix, but you won't actually be saving any money. It is also worth noting that Blockbuster also has video games as part of their rental package - if I had a 360 or PS3, that would probably be a deciding factor for me.

My current plan is to try to make more use of the streamign while I have it and then eliminate streaming when the price change kicks in. I'll loose streaming, but they will be gettign less money from me in total. If netflix or a competitor starts offering newer titles (that I actually want to see) on streaming, then I may switch again

I did not know that Blockbuster had a non-PPV streaming option and I have not been able to find info on it (such as a list of what titles are availabe), but I would like to know more about that. But even if they do, I use a Tivo for my streaming device, and they only offer the blockbuster PPV streaming on it (at least as far as I know).

 

[EffEmDoubleyou]

I blame the people who use the dvd service for the increase, mostly because they're poor so they don't know how to take care of things properly.

This is the last thread I expected to see trolly behavior!

 

[Tiltyred]

I got that email, too. I have no idea what that's all about. I am signed up for the streaming only plan in the first place. But I thought the letter was unnecessary. It's amazing how upset people get about this stuff.

 

[Elfboy]

I answered strictly from a business perspective. it's inconvenient, but if it makes more money, that's what business is for right?