Wednesday, July 13, 2011

Netflix Price Hike

Yesterday I, along with millions of other customers, got this e-mail from Netflix:

Dear Anne,

We are separating unlimited DVDs by mail and unlimited streaming into two separate plans to better reflect the costs of each. Now our members have a choice: a streaming only plan, a DVD only plan, or both.

Your 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

Your price for getting both of these plans will be $15.98 a month ($7.99 + $7.99). You don't need to do anything to continue your memberships for both unlimited streaming and unlimited DVDs.

These prices will start for charges on or after September 1, 2011.

You can easily change or cancel your unlimited streaming plan, unlimited DVD plan, or both, by going to the Plan Change page in Your Account.

We realize you have many choices for home entertainment, and we thank you for your business. As always, if you have questions, please feel free to call us at 1-888-357-1516.

–The Netflix Team

And the internet promptly ignited in a giant fireball directed squarely at Netflix.  As of this morning, when I clicked on "Dear Netflix" as a trending topic, within two minutes there were 171 new tweets..

People are pretty pissed.

Here's the thing: most of the tweets that I was reading weren't even all that upset with the final cost of the streaming + DVD plan.  What people tended to be upset with was pretty much two-fold: 1) that it was a 60% increase all at once, and 2) that there would be no corresponding increase in streaming content or other boost to service.

I get that even if all the people who say they're going to downgrade or leave their Netflix subscription actually do so, that Netflix will still make money.  I get that it costs a lot of money to distribute all this streaming content in addition to DVDs.  I get that it's still less than half the cost of cable TV.

But it's still a comparatively huge increase all at once.  And the tone of the e-mail seems a little strange to me - as though they figure a lot of people are going to quit Netflix altogether so they might as well make it easy by providing the link.  Could you imagine a cable company making it that easy to cancel subscription when they announce a price increase?  Heck no - they hand you over to retention and try to sell the crap out of the great features that they have.  Netflix didn't do that in their e-mail.  There's no mention of how many titles are available via their streaming service or DVD, no mention that they have the best selection for the lowest price.  Nothing.  It's either incredibly cocky or incredibly apathetic.  Probably both.

I have until September to decide what to do.

Here's my thought process:

Back in November 2010 Netflix changed their plans to offer streaming-only as an option.  I had the $8.99 streaming plus one DVD plan.  Rather than save a buck and ditch the DVDs, we decided to pay the extra dollar to keep our service as is.  We don't rent a whole lot of movies as is, but if we rented even two movies in a month then the Netflix would be worth the extra $2.

But November 2010 got me thinking about what else was out there.  I took the time to find out that even in my little rural don't-even-have-a-Walmart-community, there is a Redbox.

Now skip ahead to yesterday, and they're asking us to pay $6/month more for the exact same service.  That means that in order for the $15.98/month to be worth it to us, we would need to rent 6 Redbox movies each month.  Not gonna happen.  That's more than 1 movie per weekend, and we just don't have the time or stamina for that.  It makes no sense for us to keep the same account with Netflix when we can rent just one movie per weekend with Redbox and STILL pay less overall.

So that's what we're going to do, and from the looks of social media we're not alone.

It seems like a really silly thing for Netflix to do on the surface - anger the majority of their customers by boosting their price without providing much justification (or increase in service).  But the reality is, they're still going to be making more money this way.  For most subscribers like me they'll only lose $2 in revenue each month, and I would bet that the majority of users will just swallow the increase.  That's not even taking into account new subscribers who will likely opt for the streaming + DVD plan.

In the meanwhile we'll keep the plan until the last possible moment and then downgrade.  We use the streaming feature a LOT, so the $7.99/month fee is worth it to us.  The same fee for DVDs?  Not so much.  We'll be using Redbox instead.

So Redbox: I think it's time that you sat down at your desk and start writing your thank you letter to Netflix.  If Twitter, Facebook, and my own decision-making process is any indication, you're in for a lot of new customers.

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