Just a few weeks ago, Netflix users were informed that their DVD-streaming option pricing would be increased by around 60%. Naturally, some were outraged, and as many as 12% of their subscribers that have signed up for the one DVD out and unlimited streaming option could be leaving the service.
But still, Netflix probably isn’t worried about the initial fallout that will result from the changing of their pricing structure. After all, Netflix has begun to add more and more new content to their streaming service in an effort to provide more appealing content for their current subscribers and to potentially draw new customers.
For many, though, that 60% price increase will be a tough pill to swallow. Sure, Netflix unlimited streaming at $8 will always be an alluring option for those that consistently use the service to stream TV shows and movies, but for those more interested in recent and new releases and other titles that may not be available via Netflix’s unlimited streaming option, the thought of having to spend another $8 will probably turn them off. That’s why, for many, the recent price increase will result in a some changes in their streaming habits.
For some, it may be as simple as spending more time on such free alternatives as Hulu or ABC Player. Hulu, although it currently runs on a ‘freemium’ model, has been a longtime favorite for consumers seeking ways to keep up on a lot of their favorite shows. It limits the amount of recent episodes that people are able to view to just 5, and anything beyond that customers must pay a monthly fee in order to access.
Amazon too, may be an alternative that some choose. For just $80 a year, members can sign up for Amazon Prime which includes free two-day shipping (which is totally awesome) and unlimited access to their entire streaming catalog. For frequent Amazon shoppers, it’s an extremely compelling value.
But for everyone else, it will mean absolutely nothing. Netflix has long been a favorite and a front-runner in the world of online movie and television streaming, allowing people to watch recent movies and shows like The Fighter and, just recently, Mad Men. Fortunately for Netflix, that 60% price hike shouldn’t turn off too many of their new customers, with reports suggesting that up to 75% of their new customers are picking up the streaming-only option. Yes, many videophiles that were originally drawn by the company’s DVD mailing options will be put off by the substantial monthly increase, certainly resulting in significant drop off of customers using both the single DVD mailing options and combined streaming and mailing options, but it shouldn’t be the end of the world for Netflix.
People are upset, and justifiably so. Many customers have turned to Facebook to lash out against Netflix and the price increase, threatening cancellation. But that’s to be expected after a price increase. Some people will be miffed, but willing to put up with it just due to their satisfaction with the service. Others will be pissed off and, as a result, most likely cancel.
But ultimately, after the dust settles, Netflix stands to benefit from this price increase. Before their streaming option became insanely popular, Netflix was best known for being the company that delivered DVDs by mail. That was their niche. But now, Netflix is probably best known for its movie and television streaming option, and the value proposition for that side of their business has become increasingly more and more attractive to customers.
Now, with new customers being far more inclined to become members of Netflix for its unlimited streaming option rather than DVD mailing, Netflix has signaled to its current and future customers that streaming isn’t simply a tacked on alternative to their DVD mailing option, it’s an entirely different service.
Still, $8 a month is becoming an increasingly more and more difficult sell in our rough economy. The value that Netflix once offered with their $10 a month DVD by mail and unlimited streaming option is no longer still there. And that sucks. But if the increased cost of their service means better quality content for the streaming side of things, that’s something I’m okay with. Facebook just needs to make sure that, as competition from other movie streaming services like Hulu Plus and Amazon continue to increase, they don’t let the money get to their heads.