You probably know Netflix raised its prices. And, like everyone else, you're probably outraged at the death of $10 1 disc + streaming plan. But the $6 price hike doesn't have to be the end of the world.
First off, everyone should probably calm down and understand that this move isn't a greedy cash grab by Netflix. In fact, the company is actually trying to subvert the establishment, whose own greed has led them to believe that streaming video is a bad thing. Netflix knows streaming is the future. Well over 60% of Netflix customers stream right now. And from the sound of things, the god of red envelopes is aggressively going after streaming content, offering upwards of $100,000 for the rights to a single episode of television. Netflix execs have gone on record saying the less money they spend on mailing DVDs, the more they can spend on acquiring streaming content.
From the way Netflix talks, they want to be proactive about going out and getting as much content as they can and establish success before networks and studios can validate their decision to safeguard that content. Sure, Netflix is very profitable, but getting that content will require a significant amount of money up front.
But here's the problem: Right now, the Netflix streaming library sucks. Despite the fact that it's a cheaper method of deliver for Netflix and easier to manage for customers, studios would rather Netflix not stream anything at all for fear of losing money on more standard movie licenses. It's mostly full of old and forgotten films that people either have already seen or have no desire to see. Sometimes good movies and TV shows will pop up in, but they generally disappear weeks later. And with The Criterion Collection packing up and moving to Hulu, Netflix's streaming flaws are even more apparent.
The other issue: Netflix's DVD service is great, and that only underscores how emaciated its streaming library is. You wait 28-days and you have access to pretty much any movie you could ever want. As long as you have the patience to wait for the movie to arrive, and ability to remember to drop it in a mailbox, it's fine. Comparatively archaic, but fine. Netflix believes this service is still viable in the long term. The problem is, will people really pay $15 for both? And if they pare down to just the DVD-only plan, and turn to another service like Hulu Plus or Amazon Prime for their streaming needs, what does that mean for the future of Netflix's streaming library?
Trying to find a middle ground, Netflix has, up until now, sacrificed new movies so that people can have cheap plans. If Netflix wants users to embrace this new $16 1 disc + streaming price model, it needs to understand that maintaining the current cycle of offerings is not enough. And I think they know that. But they need to offer up a better justification for the price raise than this:
At the time, we didn't anticipate offering DVD only plans. Since then we have realized that there is still a very large continuing demand for DVDs both from our existing members as well as non-members. Given the long life we think DVDs by mail will have, treating DVDs as a $2 add on to our unlimited streaming plan neither makes great financial sense nor satisfies people who just want DVDs.
How about more new releases available to stream? Way more. Announce more exclusive, original TV series, like that awesome David Fincher/Kevin Spacey project that's on the way. And ideally, how about a few major new releases available before the 28 day purgatory? That may be unrealistic, but so is expecting customers to swallow a 50-percent price hike without upping the quality of your product.
But the company doesn't have time to sit and ponder its options.
There are plenty of alternatives for people to turn to. Hulu is already a fully-realized threat. Amazon Prime essentially offers its streaming library for free (once you factor in the cost of shipping on your Amazon orders), and keeps improving the selection. People who have cable and HBO have access to high quality movies and TV shows through streaming apps and on-demand channels. For people considering going streaming-only in light of the price hike, or never cared about the disc service to begin with, canceling their Netflix subscription all together might not even seem that major.
If people want more from Netflix, they need to check in with reality, financially speaking. Netflix CEO Reed Hastings once went on record, putting that exact sentiment into words:
We can't afford all the new stuff and offer the service for $8. So at $8, we're a complement to the new-release business.
So maybe people need to speak with their wallets instead.
Instapaper founder Marco Arment took to Twitter and ventured a guess about the effect the streaming-only plan will have on Netflix, and thinks that if a large number of people go streaming-only, it's possible Netflix will have more firepower to negotiate with going forward. He also thinks it's possible Netflix was caught off guard by the costs involved in scaling up their streaming operation, and needed more financial resources to do so. And Arment is onto something. Netflix needs to find a way to strong arm studios into giving up more streaming content. Right now, the studios have the power.
Netflix has everyone's attention now, but Hastings and Co can't just sit on their asses. Let's keep our fingers crossed that this price bump isn't in vain.
Image via Flickr/Jovino