Netflix Plans To Raise Prices By "$1 or $2 a Month" 202
New submitter Burphytez (3625571) writes with this excerpt of a Reuters story, as carried by the Chicago Tribune: "Video streaming service Netflix Inc said it intends to raise the monthly subscription price for new customers by $1 or $2 a month to help the company buy more movies and TV shows and improve service for its 48 million global subscribers. Investors welcomed the announcement by Netflix, which had suffered from a consumer exodus and stock plunge after it announced an unpopular price increase in July 2011. The company's shares jumped 6.7 percent in after-hours trading to $371.97, after the company released plans for a price hike and posted a rise in first-quarter profit that beat Wall Street expectations."
Not Necessarily A Bad Thing (Score:3, Interesting)
While as a consumer I'll bemoan paying more, the reality is, to deliver quality content they need to find the price sweet spot. It's still way below the cost of cable TV, so I don't think it will hurt them in the long run.
Yes, it seems like it will mainly benefit shareholders, but with the lack of ads and low price, even after the increase, who can really complain?
Re:Not Necessarily A Bad Thing (Score:5, Interesting)
Yep. Their goal is to encourage long term subscriptions and not binge subscribing. They have a "problem" where people will subscribe for one to two month, binge watch content, and then unsubscribe for about six to eight months.
Re:Milk that cow! (Score:5, Interesting)
A friend did some research on this:
There are three companies involved:
Netflix (Content provider)
Cogent (Transit provider)
Comcast (Internet service provider)
It was Cogent, not Comcast that was the bottle neck.
Here’s how the industry works. These companies negotiate with each other to use each other’s services.
So, Netflix agrees to pay A for Cogent to provide B amount of bandwidth. Cogent agrees to pay C to Comcast for D amount of bandwidth.
What happened is that Cogent ran out of bandwidth. Under normal industry standards, Cogent is expected to pay E for F additional bandwidth. In what appears to be some pretty underhanded and sneaky business practices, Cogent demanded that Comcast provide the additional bandwidth for free and tried to make it look like it was Comcast’s fault.
Basically, Cogent was getting money from Netflix to provide a service that it couldn’t provide.
The Comcast-Netflix deal is basically, that Netflix decided to replace Cogent and hire a new vendor. Comcast is a large company and offers multiple services. Netflix could have gone with any vendor they wanted. They choose to go with Comcast apparently because Comcast was offering them a better deal than anyone else. I don’t know if that means they are charging less than Cogent or perhaps there’s some technical advantage (such as better performance or more reliability) with hiring the same vendor for two different services.
So, the reason why Netflix is paying Comcast is because Comcast is now providing a new service (transit provider).
Also, this money is not a brand new fee that Netflix has to pay someone. This is the money (A) that they were going to give to Cogent.
Again, Netflix could have used any transit provider they wanted. They choose Comcast because apparently, they offered the best deal.