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Netflix Price Hike

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Known for its iconic red envelopes, the inventor of the postal-mail DVD service, Netflix, announced this week that they will stop offering a hybrid price for rentals of streaming video and discs.   Instead of the custom $9.99 that covers the rental of one disc at a time as well as receiving unlimited access to Netflix’s streaming library, customers must now endure separate fees for streaming as well as DVD rentals with each at the cost of $7.99.  This means that to acquire both discs and Internet streaming a subscriber must now pay $15.98.

The backlash has pretty much been unending.  Customers, who tweet, showed their outrage by threatening on their Twitter accounts to unsubscribe from the popular DVD rental business.  Some have already opted out on the new price hike and cancelled their Netflix accounts.

While Netflix is currently reeling from a constant flow of backlash from the internet and beyond, analysts following the company’s decision say the price increase was a bad decision.

Yet there are others who see differently and are rallying on the company’s behalf.

GigaOm’s Ryan Lawler is seen cited in Newsy saying that the move makes sense, since it will give the company better control over costs associated with streaming or disc-mailing plans.

“By forcing subscribers to choose, it’s likely betting that most will go streaming-only, thereby lowering the infrastructure costs of supporting them.  As we wrote last year, the real cost of its streaming service isn’t defined by video storage…but in the acquisition costs that come with it.”

Still, users throughout the nation are continuing to voice their concerns over Netflix’s price increase, hoping to sway the company.

According to Business Week, Netflix customers flooded the company’s Facebook page with over 42,000 comments to which 98 percent of them were negative.  The responses from media outlets have not all been that positive either; some have even gone as far as to predict dissatisfied Netflix customers drawing business for competitors like, Redbox and Blockbuster.

A good way to put all this into context is by applying the following prompt that could be found on most Standardized Tests, like the MCAT or GREs: “People too often believe liberty is maximized when obligations are minimized.”

Applying the prompt to a customer-business spectrum, people know a good deal when they see one.   So in the case of Netflix, if customers are expected to pay more for the exact same product just doesn’t make any sense; the product has to improve.

Dan Rayburn from Streaming Media notes that the streaming service still leaves him wanting.

“In January of 2009, Netflix confirmed it had about 12,000 titles available for streaming.  In September of 2009, [it was] 17,000.  Today, it appears that Netflix has about 20,000 titles for streaming…If that number is accurate; it means that at any given time, Netflix has only added about 4,000 pieces of content a year for the past two years.  That’s not a lot of content,” said Rayburn, who is cited in Newsy.

New subscribers can expect to pay the updated rates, but existing customers won’t see their bills change until September 1.

Photo Courtesy of Mr. Thomas via Flickr

2 Comments

  1. Travis

    July 15, 2011 at 11:20 am

    Nice article. I wouldn’t mind paying around $12 a month for streaming only if movie selection on it was updated on a monthly basis, or at the very least every couple of months. This is a result of the leverage shifting from Netflix to the content providers. The content providers have more channels available to them, and if Netflix wants any of that content, it’s going to need to pay up. If Netflix had any brains they would have been inching the rates up every six months to avoid doing it all at once, because the company knew content costs would go up, it just didn’t know exactly how much. I write about the Netflix situation on my humor blog: http://simplemanssurvivalguide.blogspot.com/2011/07/netflix-hate-google-love.html

  2. OLVIA

    July 15, 2011 at 11:30 am

    that doubles the price that it originally was for people like myself and my family here that cannot afford cable 8 bucks for unlimited movies was AMAZING… I cannot afford to pay 16 thats how difficult times are for us right now and thats the main reason why alot of us are upset!!!!! there are alot of ignorant people saying well if it upsets you that much than maybe you should cancel your order and start REDBOXING it!!!!! Ummmm hello redbox is more expencive!!! N FYI it was 10 bucks for unlimited online and dvd which is what we have so if we wanted to watch 100 movies in a month and 4 mailed out to us iit was only 10 bucks a month with REDBOX ITS $1 DOLLAR PER MOVIE PER DAY so a 100 movies is $100’s… can you explain how redbox is better now!!!!!!!! Not at all!!!!!!!!!! I am so infuriated with this price change that its not even funny!!!!!!

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