Why Netflix Had To Raise Its Prices

sperlingreich writes "Last week, after movie streaming service Netflix raised its prices by 60%, the company's customers took to blogs and social networks in revolt, threatening to cancel their subscriptions. However, between the cost of mailing DVDs and paying increased licensing fees for content, a Netflix rate hike was inevitable. Is it still a great movie bargain? What alternative services are there?"

Re:Whiners...

[oGMo]

My "cable" company (if you consider AT&T U-verse cable; it's close enough) wanted $120+ a month to watch what I wanted and DVR it. Corrupt video? Schedule get screwed up? Local network happen to be out? I'd be screwed. This was on top of $50-$60/mo just for internet. So now it's $50-60/mo on internet plus $16/mo for Netflix, $8/mo for Hulu Plus, and I can still buy $96 worth of TV off Amazon or iTMS and still break even!

Of course I'm sure the internet providers (who also provide TV) will start getting bitchy when people start dropping their service for cheaper options over their existing network connection. But their service is crappy and their prices are outrageous.

Re:Are movies worth it?

[SethJohnson]

Since you're being frank with me, I'll be frank right back. You are completely out of touch with contemporary cinema. There have been plenty of excellent movies released by 'the industry' and screened in Portland theaters over the past 4 years. You just aren't connected with what is going on in film these days.

Examples:

• Winnebago Man
• Tree of Life
• Exit Through the Gift Shop
• Inside Job
• Black Swan
• True Grit
• Hangover
• King's Speech
• Milk

Seth

No sports on Netflix

[tepples]

So now it's $50-60/mo on internet plus $16/mo for Netflix, $8/mo for Hulu Plus

I've recommended this to a couple families, and both told me they'd rather go back to dial-up than give up ESPN.

Re:Cost of mailing DVDs

[tepples]

What increase was there in the cost of mailing DVDs?

The United States Postal Service raises its rates over time due to increases in motor fuel costs and labor costs.

Re:The issue wasn't raising prices

[swilde23]

We're talking about streaming movies here... I suppose one could make the argument that they actually own X copies of the movie (where X is the number of active streams allowed). It seems more likely that they only have one digital copy that they use to stream to everyone who wants it.

Re:The issue wasn't raising prices

[causality]

That was my first reaction as well. But think about it. Why would Netflix intentionally bad-mouth the very people they're trying to negotiate lower prices with? That would accomplish nothing except even HIGHER prices for the content.

Because unlike the copyright cartels, Netflix is actually trying to bring content to people the way people want to have it, in an online form where much of it is at their fingertips, without having to resort to piracy to achieve same? A legitimate service that's about as good as what the pirates enjoy is a good thing for everyone. It's something the cartels should be encouraging. If they had any sense at all or any ability to think beyond the next quarter, they'd remove as many obstacles as possible and become as easy to deal with as possible in order to help this happen.

Netflix is bringing them a lot of business they may not have enjoyed otherwise. That should be a decent bargaining position. If not, someone at Netflix needs to learn how to negotiate...

Their hands were tied. Sure, what they ended up saying didn't sound good at all, but there's no way they could have blamed the real reason for the increase.

I think they'd be celebrated if that's the reason and they were actually honest about it. The standard corporate practice is to insult your customers by giving them a line of bullshit, as though they were too stupid to read between the lines. They'd distinguish themselves from most other corporations by choosing to do otherwise.

Re:Shut up, you babies.

[timeOday]

Did you really think $9.99/mo for 1 DVD at a time + all the streaming content you can eat was going to last forever? Those are *startup* prices. They do that to grow the business, then they jack up the prices when they need to be profitable.

Bzzt, wrong. Netflix already was profitable. [wired.com]

Re:The issue wasn't raising prices

[naoursla]

Netflix has zero negotiating power with digital streaming. They have negotiating power with DVDs because retail prices give them a BATNA.

The studios will raise their prices until subscribers * price is maximized. Then they will raise it a little bit more and take away Netflix's profit. If they give up their DVD mailing service then they are walking dead.

Blockbuster is dead because they didn't do the retail BATNA. They got in bed with the content owners and those owners ****ed them (in bed).

Never do a business where you have a single provided of your supplies if you want to make any profit.