After Netflix announced that they are restructuring subscriber plans on their blog and through email to subscribers, a whirlwind of negative responses dominated internet forums. The new structure separates the DVD-by-mail and the video streaming into two plans. This restructuring will effectively raise prices by 60%. The original unlimited video with one by mail DVD went from $9.99 to $15.98.
This change has erupted into a fury of angry subscribers, venting their dissatisfaction on the social media sites, such as Facebook and Twitter. People have gone as low as comparing Netflix to the cable companies. As far as I can tell, nobody has compared them to Blockbuster yet, but that vile name might be slung at them soon. I’ll admit I used a couple of expletives when I received the email; however, instead of ranting (many others rant better than me) lets examine three important aspects of this event: why people are so angry, why Netflix did this, and what are people’s alternatives.
The obvious reason for people’s anger is having to pay more for the same service. When times are tough, financially successful companies raising prices rubs consumers the wrong way. Netflix’s enormous success is playing to their disadvantage because people will interpret the move as the company sucking more money out of them to increase profits. People can still drop the DVD-by-mail option and move solely to video streaming to save money, but what Netflix has underestimated is subscribers’ desire for DVDs.
While Netflix can use the increased revenue to expand their video streaming options, Netflix’s physical library will probably always be larger than the options on video streaming. Also, DVDs and Blu-rays offer significantly more options for consumers. They have special features and language controls, which are lacking in Netflix’s video streaming service. Also, as Netflix’s track record has shown, movies drop out of instant queues much faster than DVD/Blu-ray queues. People want the option for DVD-by-mail, they don’t want to be forced to choose.
Now, why did Netflix choose this unpopular path? Netflix stated that they hired numerous new customer service reps in anticipation of complaints. They had a fairly good idea what was in Pandora’s box. It appears that Netflix wants to impel consumers to choose video streaming only because they see it as the future. First, the cost to deliver a movie over the internet is significantly less than mail, 5-10 cents compared to 75 cents; however, this cost difference may be a misnomer.
Costs for offering content online will most likely skyrocket, very soon. As many subscribers are aware, Netflix had to pull all of Sony movies from their online service because of their contract with Starz. Netflix CEO Reed Hastings anticipates that the cost for Starz’s library will jump from $30 million to $200 million per year.
Last year, Netflix paid $406 million for streaming right. This year, they will pay an estimated $800 million, and next year, experts predict a $1.3 billion price tag. Granted some of these increased costs are a result of Netflix’s push to increase its online library. While this argument is very similar to the one constantly given by cable companies, the reality is many believe online streaming is the future and content producers have expressed their desires to cash in.
Finally, what are our options? In my opinion, not great if you want both video streaming and physical DVDs because Netflix is the only true player in town, which is probably contributing to people’s frustration.
First, there is Hulu Plus. Hulu Plus has a wonderful selection of new and old TV shows along with some movies, such as the entire Criterion Collection; however, they completely lack new movies and they have commercials…oh so many commercials. Also, Hulu is reportedly for sale, which could result in a severe decline in their library offerings if Disney/ABC, NBC, or Fox decides to pull their content since they no longer have a financial stake in the site.
Next is Amazon. An Amazon Prime membership, which is $79 per year and free for college students, offers subscribers 2,548 movies and TV shows for free and free two-day shipping on any products; however, there is a significant problem. Most, if not all, new instant streaming movies will still cost about $1.99 to $3.99 per 48-hour rental period.
A DVD option is Redbox, which could be appealing to many. If you rent eight movies or less a month and are happy with the service’s library, which is geared toward new releases, Redbox will save people money and satisfy their viewing needs. Redbox could be a standalone option or a supplement to an instant streaming service for consumers.
The final major option is the previously besmirched Blockbuster. On the heels of Netflix’s decision, Blockbuster announced a new promotion for their Total Access service, which has become a hybrid of DVD-by-mail and classic DVD rental services. For $9.99 per month along with the first month free, subscribers can have one disc at a time, which initially does not sound better than Netflix, but customers will be allowed unlimited in-store exchanges of their disc at any of the numerous Blockbuster stores. The immediate availability of Blockbuster stores may warrant the extra $2 for many.
Combination of these listed options will probably satisfy many and could serve as a suitable replacement or supplement to a reduced Netflix plan. We still have until September 1st to choose our next course of action. What will you do when that date arrives? Jump ship? Stay loyal? Is there a magical option that I’m missing?