Netflix, What Are You Thinking?

One of my most respected and admired businesses, Netflix, unveiled major changes to their pricing structure. If you are a customer, you probably received an email yesterday announcing the price increase. Netflix just asked me to pay a 33% increase in fees for THE SAME SERVICE. My current package (2 CD's and Streaming Movies) used to cost $14.99 per month — now they want me to pay $19.98 per month.

Guess what? Since my family avidly use Netflix's streaming and are frustrated by the lateness of new release DVD's hitting our home, I opted to reduce my monthly subscription to streaming for $7.99.

Netflix just lost almost 50% of my monthly payment in one fell swoop. Hopa!

Now from the face of it, this is a stupid decision. It's not like the cost of providing the services increased dramatically and Netflix had to pass on the increase to their customers.

Something else is at work here. Some facts:

  • The DVD industry has been in decline for some years now.
  • The studios are squeezing Netflix with their DVD launch. Stores and OnDemand get it months ahead of Netflix.
  • The model of mailing DVD's is getting old when technology, broadband, and wireless is exploding exponentially.
  • TV is hurting/dying and Netflix sees an opportunity.

I think Netflix has to 'rejigger' their model - move away from DVDs and focus more on streaming. That means big leaps in strategy, operations, and most of all - pricing.

Unfortunately, I've been using Netflix (off and on) since they started (I hated video stores). I wish they had a better deal for us long-time customers.

This is where I think they dropped the ball. Most people will be highly reactionary to the price change and react accordingly. Like me.

What are your thoughts on this? If you use Netflix, what are you going to do?