Netflix Price Hike A Result Of Our Refusal To Give Up Physical Media
Netflix Price Hike A Result Of Our Refusal To Give Up Physical Media
Posted 07/17/2011 at 5:33pm
| by Justin Kerr
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Netflix has been facing a ton of consumer backlash over its recently announced price hikes, and while the company has been fairly tight lipped when it comes to explaining why it was necessary, the Associated Press claims to have the answer. According to sources close to Netflix, the company simply underestimated how long it would take to convert customers over to a streaming only future, and was stuck with a business model that simply couldn’t keep up with their long term goals.
This starts to make sense when you consider that Netflix dropped over $406 million into streaming rights for its online library last year, and these fees are expect to climb to over $1.4 billion next year. With such a massive investment required to continue building up its online catalogue, you can start to appreciate why it might want to split off the two business units when the cost of handling physical media continues to rise as well.
"Netflix is under enormous pressures from the content owners to write bigger and bigger checks," claims Arash Amel, research director for digital media at HIS Screen Digest. "It had to find the money from somewhere."
Given how reasonable these business realities appear to be, it makes us wonder if people would have been just as upset if Netflix had laid the blame on content rights holders, rather than simply spinning the price hike as a positive.
Let us know what you think in the comments below.
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davzway
July 18, 2011 at 4:00pm
First, Netflix even with the proposed rate hike is still far and away the best Entertainment bargain around, when compared to Hulu (std or Hulu +), Amazon on Demand, Blockbuster (whereever they are going if they are going, and maybe get there), Boxee, Crackle and etc. etc.
Have been reading for the past year how much ALL the content holders and producers are trying to scuttle (or at least PROFIT) Netflix's amazing climb to the #2 Cable provider in the country in three years. Mark the recent abrupt exit of many Starz offerings due to a 'contract dispute with Sony', or any of the other content people, doubling, quadrupling, and higher charges for the coming year compared to the previous year.
HOW can Netflix even KEEP the current level of content WITHOUT raising pricing when faced with such tremendous increases in costs. THERE IS NO SUCH THING AS A FREE LUNCH. Everyone, including myself, want more content, newer content, and to see the new movies / tv shows as soon as possible on Netflix, Way better to watch on Netflix without the commercials than to watch on Hulu, std or +,, and Hulu + wants $8 a month for Hulu+ AND have you watch commercials to boot. Don't mind the $8, I like Hulu as there are some shows I cannot see on Netflix <infuriating as it is that you are limited to seeing only five shows .... ie. I am not going to watch Eureka Season 4 starting with Episode 6... real hard to follow the story line> So I continue to watch Hulu (not +) and will put the money towards Neflix. Folks may bite off their noses to somehow punish Netflix by quitting for wanting to stay i business and make a profit,,, I say Bitch at the Hollywood crowd who are holding up Netflix for the HUGE increases that is causing the price increase... JAO davzway
Slugbait
July 18, 2011 at 12:59pm
It's not just Netflix who underestimated the physical media vs. Internet.
Take the music industry (please! /rimshot). From one side of their mouths, they crow about how well they are doing with digital downloads (after the DRM sucker-punch from Steve Jobs), and from the other side of their mouths they claim their industry is on life support in a drug-induced coma.
Simply put, compression is eeeville. When you're rocking a Panasonic P54G20 with an ES receiver pushing DefTech and Klipsch and content provided by a C2D/EE and GTX460-based system, compressed content reveals its shortcomings in glorious detail.
Service downtime or degraded performance? Content quality option settings? There are plenty of other reasons why I prefer physical media.
Streaming is only an enhancement for me...I have never considered it as a primary conduit for content. And the content providers need to strike a balance between convenience, price and quality. I think Netflix is just now realizing this, and pricing accordingly.
I think the problem is that consumers want BetaMax quality and features with a VHS price.
bling581
July 18, 2011 at 9:52am
"According to sources close to Netflix, the company simply underestimated how long it would take to convert customers over to a streaming only future..."
Customers not wanting to convert to streaming is only part of the reason. When there's so much content that's not available to stream the alternative is to have both. They're really shooting themselves in the foot by forcing people to choose one or the other, or pay up.
Trestoncobbs
July 18, 2011 at 7:16am
Netflix is giving Blockbuster a reprieve with this recent price change. For the same price as thier now 2 dvd and streaming i can: drop netflix dvd service and get blockbuster's 2 dvd out plan. Now i have access to games, 5 in-store exchanges per month, and faster access to new releases. And if this sounds like an ad for blockbuster then i'm ok with that. Way to think your business decision through. And if i decide their streaming library isn't getting content i want then they have just lost my business completely. I plan to tell everyone i've introduced to netflix to follow my lead. It may not make much of an impact on a national sclae but I feel somewhat responsible for letting everyone in on the better deal.
sean76
July 18, 2011 at 7:08am
You know, if they would provide ALL their media online, I would not want to have dics coming at all at that point. There is alot of older movies that I want to watch online, but they seem to not ever have anything online. Once they correct this issue, maybe then I wouldn't be pissed about them upping the prices.
Renaissance 2K
July 18, 2011 at 7:28am
Content providers don't want to give them streaming rights to the movies that people actually want to watch.
Adding movies to their streaming library is very easy. Earning the rights to do so is difficult because it cuts into profits that could be made from one-time rentals and OnDemand purchases. Netflix would do it if they could.
RUSENSITIVESWEETNESS
July 18, 2011 at 4:31am
Don't wreck your flying cars on the way to Starbuck's....
All this "The future is here" talk is bullshit. It's not. We don't have the infrastructure to support full-on streaming services, because in most cases, individual service providers can control access to content the bandwidth caps and pricing.
This price hike is really about the closing of brick and mortar video stores. Netflix doesn't have enough competition, and can raise its prices however much they want.
ARCHANG3L
July 18, 2011 at 12:48am
Capping and greedy aside. Expensive or not I cant get myself to pay for DVD's that got released at my redbox 2 months ago. I was debating it before and this may have done it. The real trick is geting HBO, Showtime and PPV events. Then and only then will cable be a thing of the past. Hulu is mostly smoke and mirrors via the "app" integrated into TV's and media devices. Most of the content on HULU can be accessed via the tv channel's website within 24 hours. Personally, Im getting ready to give the Blockbuster trial a whirl as we have quite a few stores round here and offer no BluRay charge and include games and kiss my Quantam Leap episodes goodbye lol.
nmanguy
July 18, 2011 at 12:13am
I want to have the $7 streaming plan and the $5, 1 at a time, 2 per month, DVD plan, but they don't have that combo.
d.o.a
July 17, 2011 at 11:55pm
I will be dropping the streaming from my Netflix plan. Steaming is OK ... but when I am getting Bluray through the mail the quality is not the same - plus I always watch a movie with subtitles ON ... streaming may be the future but it has a long way to go to catch up to the physical media ...
damninhell
July 17, 2011 at 11:33pm
I don't think a big enough effort was ever made to move more people to stream content or else we would have seen new releases on the play it now category,rather they kept buying older movies to fill that criteria(cheaper i guess). Not to mention that alot of people have caps or simply donot have the bandwidth available to stream, I've heard of a place where they charge over $50 for 56k.
medavid16
July 17, 2011 at 10:49pm
I feel like the general consumer is being brainwashed. What about areas where you just can't get wifi and can't stream? What if you travel alot and just need a physical disk (train/car/plane)?
Yes, streaming and cloud is the future, but physical mediums still have a niche.
As for the options, come on, the streaming content is not that great even with the new sign ups. There are better options, even Blockbuster has better politics with the minus 28 day policy.
I refuse to let Netflix tell me what I should and should not do. If there's a fault, it sure as hell isn't the consumers fault for wanting to stick with physical mediums a little longer. Blame it on the idiot who projected it wrong. Fire him/them, don't raise our prices.
wljk
July 17, 2011 at 10:08pm
I have the streaming and would like to point out a few things..
1. The HD quality depends alot on the source material that is being streamed. If it is not a good HD source, then it will not look good, I have no problems unless my connection is bogged down due to maintenance, or other items using bandwidth.
2. I DO get surround sound, yes 5.1. You need to run an Optical Toslink cable to you reciever, and set it to Dolby Pro Logic II, works fine for me, and this is how I listen to all of my streaming. Whether thru my Xbox, or my Blu-Ray player. I have HDMI to the Monitor and the audio is sent the way I just described. (using the analog loophole)
Slugbait
July 18, 2011 at 11:50am
Most people consider 5.1 = discreet. Dolby Pro Logic II is only an improvement over Dolby Pro Logic, meaning that instead of mono rear, you have stereo rear...but it's certainly not discreet audio, you are still working from a 2-ch stereo source.
aarcane
July 17, 2011 at 10:07pm
Lay the blame where the blame belongs, and people will surely grumble, but they'll accept it and appreciate the honesty.
I for one am glad to be able to save $2 and ditch the streaming bull-crap. the poor quality, DRM encumbered fooey isn't worth my time. If I can't watch it on linux, I won't pay for it. It's that simple.
Also, remember: Every time you stream a file, god kills a kitten. As a cat lover, I save all my youtube movies to harddrive the second time I watch them, and never load them over the wire again. You all should do the same, and when netflix streaming has this capability, I'll switch.
Wingzero_x
July 18, 2011 at 8:22am
So do you watch DVDs? I ask because for the most part you can't watch DVDs on Linux, unless you are breaking the law, and I don't think BluRays are watchable at all.
As far as you wanting to download and save movies and watch them at your leisure, there are services for that. I use iTunes, and PSN network. However I don't want to own every movie I watch so I love streaming. After all I already have over 600 DVDs laying around the house, and many I've only watched once, haven't gotten around to watching them yet and all still shrink wrapped, or the ones that I bought tried to watch never to touch again. So I like streaming movies, but then again I don't mind using proprietary software, or content owners being able to protect their content. Even if it's a little inconvient on my part for having a player use a couple of kilobytes of additional HDD space.
nmanguy
July 18, 2011 at 12:12am
Are you joking? If they had no DRM and let you download the movie file, they would never get content holders to agree to their terms. And are you trying to watch it on dial-up? With my Comcast broadband I get the pseudo-HD that looks better than DVD quality.
wshwe
July 17, 2011 at 9:34pm
For some time I have expected a big Netflix price increase. I don't mind the higher prices because the old prices were bargains. I blame the content owners. In many cases the actual content creators don't hold the distribution rights. The owners are squeezing Netflix as hard as possible for both the streaming and physical media rights.
Willers
July 17, 2011 at 8:56pm
The price hike actually had no effect on me at first. Another $5 was all it was going to cost me. I'm not rich, but I'm not begging for money either.
After I thought about it, we don't really use the DVD's anyway. We borrowed one, and it sat on the shelf for a good long while. So I dropped the DVD option and now I'm saving $2/month
Holly Golightly
July 17, 2011 at 8:23pm
I feel, that the future is all about downloading/streaming only. The way of the DVDs and Blu-Rays are too old, and will be a part of the past much like VHS cassettes. It only costs 10¢ yet, they cost soo darn much to buy. I remember a time when DVDs were $20 and Blu-Rays were $50... I think those prices are insane. Not to mention, physical media is not as convenient as downloads. What NetFlix is doing is actually good. Heck, it would be great if every single movie ever made was up for download. I would be glad to pay a higher premium for NetFlix if this is possible anyways. But in order for everything to work in their favor, broadband companies need to get rid of the damn caps that is making everyone mad. The moment broadband caps become a thing of the past, is when services like NetFlix will prosper. But until now, things are going to look pretty negative for them. Still, this wont stop them from being successful. As long as they pay the GREEDY in those corporate offices down at Hollywood. Disney and Viacom definitely need a wake-up call!
Marthian
July 17, 2011 at 9:10pm
Thats the reason WHY evil ISP's don't want Netflix to prosper. They got other competing services that they want to sell to people. Personally, I don't really see (or hear) a lot of people watch tv anymore. My grandparents I believe got rid of their Cable service, and have been using the DVD service from netflix as far as I know.
And the Bandwidth is a resource arguement from them is just absolute BS, it only costs about 1 cent or less for 1gb of bandwidth. I think ISP's are just too stubborn to realise times are changing and just don't want to admit cable seems to be dying now.
livebriand
July 18, 2011 at 1:14pm
So true. In fact, a while ago I cancelled my cable TV because comcast was being a big PITA - claiming we didn't pay each month when we had auto billing setup and they kept trying to bill a card we had previously given them rather than the one we most recently changed it to. Since then, I've lived with over-the-air tv and netflix. It works well enough. It's too bad that my only options are SLOW att dsl or fast comcast internet though, so I ended up going back to comcast, for internet this time, because my att connection couldn't handle more than 480p video. Such a monopoly. Look cable providers, no matter what, you are NOT going to make me more likely to use your TV service by implementing data caps. It's too bad that since they're monopolies I don't have a choice but to use them. If I had an option to go with something like Verizon FIOS, which lacks data caps, I would.
Holly Golightly
July 17, 2011 at 9:33pm
Wow, that is soo true! Cable is definitely dying. No joke, I just disconnected my cable box last week because I only watch 1 channel, and it is just not economically practical to pay $60 for just 1 channel I like to watch. It would be great if they offered an a la carte service for online users. Basically, pay for 1 channel. I would be more than willing to pay $10 for just that one channel. But because cable requires you to pay for these expensive packages which chances are people will only watch a handful of channels which are at times, flooded with commercials. NetFlix is a great commercial-free experience that you watch, when you want. And streaming it to computers, smartphones and tablets only makes watching your favorite shows that much more easier. Congress should come up with a law that would do away with those ISP caps. That way competition is fair. Plus, most cable providers offer internet anyways, so they will not be losing out... All they have to do is jack up the price... I am pretty sure people are more than willing to pay more for faster speeds, and unlimited service. In a way, everybody wins.
My mother likes to channel surf, and likes to discover shows, although it is not hard to discover shows on NetFlix, you do have to type what it is you are looking for. This is why I favor cable service to compete with NetFlix on an even level. Offer channels online, and they may have a fighting chance. But yeah, I do not watch TV anymore either. I just play videogames on my computer. TV was great back in the 90s and before... Now it is just trash thanks to these so called reality shows. I think once Google starts offering broadband nation-wide, things will change greatly. With their 1Gbps without caps, the cable and phone companies will have to either put up or shut down. It is inevitable that NetFlix will succeed, it's just cable companies trying to slow it down. Their price hike has no effect on me, as long as I get an ad-free experience at MY time and not theirs.
Wingzero_x
July 18, 2011 at 8:43am
I just don't see the logic behind the expendure of cable. I used to have to whole digital package and I'm thinking I watch maybe 6 channels out of XXX. Seriously most of those channels I had no desire to watch, and all that "reality" crap just became a killer. To this day I have no idea who the Kardassians are, or why I would want to keep up with them. I wonder what lesson I am supposed to learn from TLC. And if I want to see what goes on in a pawn shop it had better be in the seedy parts of Detroit!!
Holly Golightly
July 18, 2011 at 11:45am
I think what became the death of cable was the change of subjects.
MTV which is suppose to be a music channel does reality tv exclusively.
The History Channel, which is suppose to be a channel about historical events, now talks about aliens and 2012... So much for history!
AdultSwim, suppose to be a channel with cartoon comedy geared towards a more mature audience, now does anime and live action shows.
SciFi channel now showing things not related to SciFi... Saldy enough, the breaking of rules will never cease to a halt. I only watched TCM because it is the only channel that pretty much sticks to its topic, which is classic movies. I would love it if the channels offer an online subscription, I would be all over their website. Aren't you glad cable is a thing of the past? I sure am! :)
Vegan
July 17, 2011 at 8:05pm
Their plan may backfire, as I'm going to choose discs if I have to pick one. I know they want me to pick streaming.
Things I give up when I stream:
Video quality, even at HD (resolution isn't everything, the compression is bad)
Surround sound
Special features
Subtitle tracks
Alternate audio tracks (their foreign movies tend to be dubbed when streaming)
My consumption of Netflix isn't exactly ravenous in the first place, so I choose discs via mail.
Marthian
July 17, 2011 at 9:15pm
if isp's weren't so stubborn and removed the caps and work on increasing data download/upload rates, we probably could have HD 1080p streaming and all that jazz... except for the last three, dunno what to say about that.
Pinkyblister
July 17, 2011 at 7:57pm
I just wonder how caps on bandwidth and downloading each month will affect streaming online content from providers like Netflix. Time will tell...
Marthian
July 17, 2011 at 9:11pm
buddy, Y U NO RIOTING!?!?
Seriously, there's already caps on bandwidth in many areas. My evil ISP is doing it right now, and the worst part is its on the faster internet speed. I only get the choice of 10mbps/no cap or 50mbps/50gb cap.
raint567
July 17, 2011 at 7:27pm
Netflix prices are not bad at all for about $25 you can get 2 DVD and unlimited streaming, thats Not bad... Only problem is that Netflix streaming catalog sucks, which makes the plan not worth the money... I had Netflix 2DVD + unlimited streaming for $18/month which was a fair price. Now that there is an increase in price I decided to try in HuluPlus, it's only $8 a month, but they have all new episodes of the shows I like to watch.
For example, American Dad, 30-rock, South Park; Netflix does Not have the new episodes while hulu does. So I decided to keep Netflix for my DVD and Hulu for my streaming. For movie watching I dont mind renting the DVD, but for show watching I would rather stream online.
Nastyman
July 17, 2011 at 7:09pm
What Netflix and Blockbuster don't seem to understand, many cable networks put a cap on downloading...which is streaming and people would want a mix of streaming and DVDs. Use DVDs when their cap is reached.
Nasty
acidic
July 17, 2011 at 6:52pm
once we get back from vacation we are cancelling netflix after 5 years. we are switching over to blockbuster. it just sucks that no blockbuster stores are around here. for $15 a month you get 2 discs at a time which can be DVD/BLURAY/GAMES. thats even cheaper than the 1 disc at a time gamefly. i have a feeling that its gonna take awhile to start getting the good stuff through blockbuster considering how many people are switching to them from netflix
DoctorX
July 17, 2011 at 6:51pm
the complete lack of movies on streaming. If they announced tomorrow that they have their entire catalog on streaming... the dvd goes bye bye
in other words... "here's your sign!"
Brock Kane
July 17, 2011 at 6:22pm
Yeah well go ahead and TKO Cable and Satellite TV, then what happens? Absolutley no competition, then Netflix is more expensive than Cable and Satellite combined.
Hey, it's all about the money grubbing fat cats. They get what they want and we're stuck with the bill. It will never change unless we change our bad habits of the need for TV.
Rivethead
July 17, 2011 at 6:13pm
...the company simply underestimated how long it would take to convert customers over to a streaming only future...
I'm not sure what they're talking about? I'd love to switch over to full streaming and so would damn near everyone I've talked to - BUT, what they seem to fail to realize is that to switch over to only streaming - i want access to all of their movies. Not just the old 80's stuff that isn't worth re-watching. Hell, I'd double my payment in a heartbeat if they could stream everything in their catalog.
iceman08
July 17, 2011 at 6:08pm
makes sense. I pay less than cable for netflix, and I use free hulu, so Why be tied to the cable?
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