Has Netflix Shot Itself in the Foot?

Every company at some point makes a mistake (Microsoft has made their fair share).  Netflix has been wildly successful and the rise of online streaming will only continue.  But I can’t help but think that Netflix may have made a mistake here.  

Like many people, we’ve (my family) been looking hard at the cost of TV and other non-essentials, and that’s why we got a Netflix subscription.  It was (overall) a good deal.   But back in October, Netflix increased the rates for blu-ray movies:

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This is reasonable, but it does cause some grumbling in the community.    But now, 6 months later:

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Wow!  Another price increase?  Not just a small one, either -- one that is about 25% of the plan cost to begin with. 

This is a blunder on many levels.  First, just as they say “cut once and cut deep” with layoffs, the same is true for rate increases.  This one now pushes many plans into the $20/mo range, and I’m sure people will drop or change their plans in response.  If the comments over on the Netflix blog are to be taken as any indication (over 300 posts as I write this, nearly all negative), it will be interesting to watch their response. 

The problem that many in the comments have stated and what I've heard from people I’ve talked with is:  many people with blu ray access receive a small number of their movies on blu ray.  Many titles are simply not available, and many prefer the portability of DVDs … I only get blu ray for blockbuster movies where the hi-def really makes the experience.

So, what happens next?   For me, the value proposition drops.  It can be cheaper to get 2 plans, one with blu ray access, the other without, since I never need more than 1 blu ray out at a time.   So, we’re likely going to go from 3 out unlimited (w/ blu ray) to 3 out (w/o blu ray) … and then, because I’m not really satisfied with that and would like to see some blu rays from time to time, drop the plan to 2 and then altogether, since I’m not getting the value out of it anymore. 

I’m not sure what the right solution is here – perhaps a “pay as you go” model.  I’ll be looking forward to seeing how they react.

Comments (1) -

Tobin Titus
Tobin Titus
3/31/2009 11:42:15 PM #

It seems to me that they would allow you to have a plan that only charges you extra for the blu-ray that you do rent. I understand that they need to be able to tax a larger subset of their users in order to afford the disks. That said, if the demand isn't there, they shouldn't even offer blu-ray. Perhaps if enough people balk at the price, Sony might be forced to reduce their licensing fees. This is the main problem with Blu-Ray winning out over HD DVD, IMHO. It is unfortunate that Sony was able to use a loss-leading PS3 to push up the Blu-Ray player count and force HD DVD to its demise. Now, PS3 is still trailing, and Blu-Ray is far too expensive. Distributing movie houses shot themselves in the foot by ending that fight too early. Now they are left with the short end of the stick, unable to bargain for lower licensing fees due to lack of competition. </rant>

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