Netflix introduces new plans and price changes
blog.netflix.com
blog.netflix.com
I think it threw away that chance and left the door open to a lot of these "entitlement" type comments that harp about how Netflix used to charge $8 per month and can never ever change that. Ever.
I for one, plan to stay with Netflix and opt for the Streaming option as long as it makes sense. As for DVD/Bluray, I will go to my neighborhood Redbox.
Blockbuster? You, I havent yet gotten over the $4.99 rental fee, so you stay in the shit list for a little while longer.
"Netflix has another year or two on most of these contracts, and then the game completely changes," says Michael Pachter, analyst at Wedbush Securities.
Pachter predicts Netflix's streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012.
And for all we know, Wedbush is short on NFLX.
People have been parroting this guys opinion as if it's fact. It's worthwhile analysis, perhaps even correct, but they've got money in this game on one side or the other and without knowing which, this opinion is useless.
All I'm saying is, Netflix's actions today would seem to point to Pachter being correct.
You could look at it the other way and say that I was getting 1 blu-ray a month for 4 bucks and now it's costing me 10. But since Netflix historically has been about the DVDs, with the streaming as an addon (historically = before 2010) I think my first price comparison makes more sense.
I mean, really, post is something like $0.40 these days. Unless a postal service gives them a price break, the $2 DVD fee is entirely consumed by the cost of mailing you (and you sending back) 2.5 DVD's per month.
The way it works is if you send enough mail to the same zip code, then you pay a certain discount (a few cents per mail piece) if you package all of that mail together. The amount of the discount varies depending on if you sort by 5 digit zip code, or just 3 digit zip code prefix.
http://marketplace.publicradio.org/display/web/2007/11/30/ne...
This is a bit outdated, but I couldn't find anything that indicates this problem has been fixed (if anyone is aware of that, please let me know).
I think they are being dishonest about their "bafflement" over the persistence of DVDs. I think the real reason is the quality of their streaming collection. There a few gems but it is filled with a lot of sub-par, unwanted, titles. I for example, have watched all the streaming videos I want for a while. Now I am just waiting for the new ones to appear and watching real DVDs I get in the mail.
But to give them the benefit of the doubt, it would be interesting to see how they determined that streaming just isn't that popular. They could have judged by the total # of subscribers that have ever setup or watched a streaming title? The best way would be if they focused on titles offered both in streaming and non-streaming form, then investigated which form people actually choose.
I got a Roku for them a few years ago to make it easier for them to stream. Last time I was there I noticed it was gone. When I asked about it they said that once they got a new TV they didn't really want to set it up and gave it to my sister (I didn't take any offense, and at least it's being used now).
I actually enjoyed it since it was a good reminder of how everyone has a threshold for the new/innovative/convenient vs. the familiar/comfortable.
I really only want the dvds for things that they don't stream. So, their new dvd plan is essentially a tax on me for their streaming plan not being good enough.
And now, given how often I actually get around to watching something, It's barely worth it at the current price, and not worth it at 2x.
[ edit quantification -- I've been a member this time for a year and a half, and just shy of half the streaming was in the first week, (two sick parents and kids to entertain will do that), and 7 titles streamed in the last year. We've gotten 7 dvds in that whole time, and watched all of 3 of them. Doing the math -- not worth $16/month. ]
Similarly, unlimited streaming makes perfect sense because you can stream as many as you want. The selection of their available physical DVDs is limited as well, you always have to stay within their catalog.
I don't know if it is actually due to throttling or not, but Netflix is preceived at least to still be throttling me.
This score is based on a number of factors, with the objective being to maximize subscriber happiness (one example question is whether is it more valuable to have quick turnaround for a frequent subscriber who is already happy with the service, versus an infrequent user who might be on the fence--it is not obvious who would be more sensitive to and negatively impacted by a delay in receiving the next DVD).
(Source: I work with people who previously worked at Netflix. This is not confirmed fact but a loose understanding based on casual conversations.)
DVD Terms and Conditions
As a result of your viewing habits and our operational practices, the actual number of DVDs you rent in any month may vary, and you may experience differentiated service during the course of your membership. Also, such service may be different from the service we provide to other members on the same membership plan. The type of differentiated service you may experience includes, (i) the shipment of your next available DVD occurring at least one business day following return of your previously viewed DVD, (ii) delivery taking longer, as the shipments may not be sent from your local distribution center and (iii) the DVDs you receive coming from lower in your Queue more often than our other members.
Edit: Klinky cited something, instead of vaguely referencing years-old events: http://news.ycombinator.com/item?id=2757009
This sounds less like "throttling" (i.e. you've gone through too many discs this month) and more like balancing (i.e. how do we distribute 100 copies of this movie to the 1,000 subscribers who have it at the top of their queue).
You are correct that it really only affects situations where demand outstrips available supply.
While I believe internally Netflix called it smoothing or something like that, throttling isn't an inaccurate term either.
Much of the anger came from the fact that an existing customer could put something in their queue & see "Long Wait" which may mean that movie would probably be delayed weeks or even months. Meanwhile their friend might setup a new account that weekend & get that same movie immediately. This lead to people feeling as though Netflix was shafting existing customers while at the same time giving new customers an unrealistic experience.
Many sign up thinking they are going to be saving a lot of money by going with Netflix, but if their main interest is new releases then they are going to have difficulties getting every new release in a timely manner. This is something that Netflix doesn't really disclose very well & they are a little misleading with their marketing as you'll often see them promoting mainly new releases in a lot of their marketing material.
One more thing is that Netflix has gone as far as hiding certain new releases on it's New Releases section on purpose so as to prevent people from being able "hog" all the new releases. This seems rather anti-customer & goes against their original motto "Connecting People With Movies They'll Love", which really boils down to "We want you to use our recommendation engine which steers you towards movies that cost us the least...".
Exactly. They spin this as a surprising thing they just noticed:
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we have realized that there is still a very large continuing demand for DVDs both from our existing members as well as non-members.
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In other words they are sort of "baffled", how come people still want to watch DVDs by mail ... hmm. Of course, it is because they streaming selection is so poor. I, for example, have reached the limit of dvds I wanted to see in the streaming section. I am just waiting for some new ones to appear or just re-watch the old ones.
I guess a strategy in my case would be to switch to mail only for 6 months, then switch to streaming only later, and just alternate like that.
Streaming offers more than I could ever watch...
It really sucks when things just vanish from your queue and you find they're gone from the service for good. Feels like bait and switch.
Amazon's pay per view streaming rental has consistently been all but perfect play.
So Netflix is better on price. Amazon is better on getting absorbed in the movie and not being thrown back into your living room because the movie stopped.
Youtube/Google's streaming rental quality is good, even great, except three out of the four movies I tried suddenly stopped and reported elapsed time as that the entire movie had suddenly been watched. Movie had to be started over, virtually ruining the experience. They did refund the rental fee without question.
For you.
I've watched hundreds of Netflix streams from 4 different states and a dozen internet connections over the last year and I can count the number of freezes on one hand.
I think I have a 'good' deal with DirectTV at $65 (and that only because of a promotion and only having 1 HDTV/DVR box and 1 regular HD box), and it's still 2x the cost of Netflix.
Not really. You don't have to be in the same physical location for streaming. I don't live with my parents and use their login for streaming too.
Then you're breaking TOS and the free ride is over. Netflix is no longer the disruptor and getting comfy as an incumbent now.
Wait, what? You were violating their terms of service and you're complaining because they're raising the price you will have to pay to keep violating their terms of service? It's not like they're even threatening to cut you off.
I'm pissed they're raising my plan, but certainly you must have known you were getting away with something.
http://money.cnn.com/2011/07/08/technology/netflix_starz_con...
This is a company that operates dozens of physical warehouses, employs thousands of people, and pays an astonishing amount in postage fees.
Their licensing costs are surely just a fraction of their bottom line.
They paid $1.2 billion in licensing costs. It's their most expensive cost, by far.
The post I replied to -- and my reply -- was addressing streaming licensing:
Pachter predicts Netflix's streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012.
In other words, of that $1.2bn you quote from their 10-K, 1.02bn was physical discs.
It doesn't look like they take positions themselves. They seem to be your standard financial services broker/dealer, in which case they do research for clients who take positions.
It's likely they have a "Sell", or at least "Hold", rating if they're writing negative notes. But that's as it should be; I think you have the causality backwards in your implication.
Q1 2010: $202 Million
Q2 2010: $203 Million
Q3 2010: $225 Million
Q4 2010: $232 Million
Q1 2011: $300 MillionAs much as everyone thinks that Netflix is going to compete with cable, the only way to truly do so is to start getting first run, quality content and that costs money - boatloads of it. Netflix has gotten a pass for now since it was the only game in town but if they want to compete for your entertainment dollars they're going to have to spend some cash on quality first run content.
I give it less then 2 years before they start offering tiered plans - and maybe something subsidized via advertising. Its the only natural evolution of their model.
I'd gladly go back to the older system whereby I was give X hours of streaming for my $X DVD plan. But the odds of me paying for a streaming plan on its own are quite minimal given the value of that service.
This ends up not affecting me at all, though. The hassle of waiting for the DVD, and then shipping it back, meant that I only ever watch the streaming stuff. (I obviously wasn't a fan of movie rental stores.) And I'm already paying $7.99.
I do it because it's very convenient, not because it's a way to save money. I'll probably switch to DVD only from them now and actually start using whatever free streaming Amazon gives me via prime. The streaming selection sucks anyway, I probably watch more on Blu-Ray or stuff I torrent.
But that's not what it's really about. If you cancel your cable and get Netflix, you are saving bundles of money. I know more than a few people doing that, and I am so freaking close to it I'm not sure why I waste the money on TV anymore other than for ESPN & live sports. If not for that, I'd be long gone.
a) Having their subscription prices raised by up to 60%. b) Being told so in a blog posting where that info is buried so far down it needs a snorkel to find the bedrock.
I didn't appreciate the way they did it: No explanation of why the increase is necessary, plus idiocy like: "Your price for getting both of these plans will be $15.98 a month ($7.99 + $7.99)." No package discount, and no consideration for having been a loyal customer for six years straight. No, just a form letter and a 60% price hike.
Their post-cancelation survey offered no way to indicate this change as the reason (and no free-form entry). Didn't they anticipate this? Maybe they don't want to know.
This makes me sad. I love Netflix. I'm not saying it's not worth $16/month, and I may even join again someday. But I hope a few million customers slap their corporate hand.
Hopefully, we see more studios learning the lean business principles many of us have adopted in order to bootstrap.
Content costs should be reduced over time given current technological abilities, and there should be significant opportunity for up-and-coming talents to get on the screen with significant viewing audiences.
So stealing is not ok because they didn't follow lean business principles--stealing was okay in the first place. It was just a happy coincidence that using netflix wasn't stealing.
The interesting thing in Netflix's case is that the product is (content + convenience), but since the content can be obtained (illegally) for free, the customer sees only the value of the convenience. If you raise the price above what the customer is willing to pay, why would you expect the customer to pay it?
Now sure, piracy is an illegal act, but so is fraud. Yet insurance and credit card companies manage to sustain a working business model.
In addition they cut the cost and hassle of legal entertainment. With this change they have now increased the cost of legal entertainment.
I'm fine with them upping my costs, as their costs increase, but this seems beyond that.
Netflix's streaming library is weak, and now that Blockbuster has dropped store inventory and changed their rental periods, I have to watch a movie in a day in order to avoid a late fee.
Bait and switch.
Also, I get a free coupon every month for an additional in-store game or movie. My kids love this for games.
Lastly, you can now add games to your queue online, so it's like Gamefly + Movies.
It's the worse deal + treating customers like they won't notice it that is the problem.
I'm not so much bothered by the price hike. My price will go up to $20/mo. I'm not going to gripe too much considering how much I use Netflix. But now that DVDs and streaming are separate plans it creates a strong incentive for me to use Amazon Prime for streaming. I'm already paying for it so I can get the free shipping. Now I can change my Netflix plan from $15/mo (soon to be $20/mo) to $7.99/mo and get the same overall service. I wonder if they thought this through.
On the other hand, my guess is that the number of Prime subscribers is tiny compared to the number of Netflix subscribers. So while this could be a great opportunity for Amazon to do something about that, I don't think Netflix has to worry about losing huge numbers of subscribers to Amazon as things stand.
(And probably switch to the limited DVD plan.)
They are duplicitous. DVD by mail is not a separate product. It is a workaround for the fact that they have failed to license their entire library for streaming. Now they have a perverse incentive to limit their streaming library to encourage people to pay extra for DVD service.
[edit] Now had they just said, "Hollywood is putting the screws to us, we need to raise our prices" I could respect that.
Netflix can raise their prices about 10x before I'd even consider not renewing my subscription.
"But comparing Netflix to Cable is a bullshit comparison, the content on Netflix is way less" you might say. In theory, you are right. The content available via Instant Watch is way limited; and it has less newer content.
All I know is that since we've started using Netflix, I've stopped buying DVD's (I used to order 15-20 a week from Amazon), I've stopped watching the DVD's I already own (I have about 1000 sitting in giant plastic tubs in the closet that I never dig through), and I've stopped watching regular television.
When I first started buying DVD's, I got it in my head that I didn't ever want to be in a situation like: "Oh, I feel like watching movie X, but I don't own it." Instant gratification.
I did the same thing with CD's when I was younger. Thankfully, the universe ran out of music that I like.
I'm fortunate that my income has always outpaced my compulsive buying tendencies, but it took a long time to keep it from spiralling out of control.
Customers are not stupid. They see right through PR speak, and you can clearly see that in the comments.
For example, in an age where bundling is ubiquitous, I think Netflix needed to have a better explanation for why one service is being split into two and why there's no discount for joining both. Netflix needed to do a two-pronged approach -- here's what we're going to do for you, and here's what you're going to do for us. We all understood the latter (we're going to pay more), but nobody gets what Netflix is offering in return.
Percentage-wise while it sounds a huge increase, it is absolutely nothing when you look at the real dollars. My cell phone bill is $100+, ISP is $70+, web hosting is $30+, and I pay $10+/month for many different web services (include many startups I found via HN). How is $8/mo for renting 3-4 DVDs a month too high? Sure, it was $2 before but you can't expect any company to make money on deals that get abused by more than a few.
I'd rather have Netflix charge their customers appropriately than go out of business or start nickel and diming like airlines or cellphone companies.
So basically, in order for it to equal the cost of a comparable product, you have to get the DVD and watch it the same night, then ship it back and hope 2.75 days is enough for Netflix to ship you another one.
Don't know about others here, but I don't really get time to watch DVDs during work days. This leaves the weekend, so for $8 a month, I can rent 2 DVDs per weekend and receive greater amount of entertainment during a more convenient time.
So using your example of 4 DVDs per month, that's $2 per with Netflix or $1 (50% less) per with box rental services. So in terms of actual spending, you are still only saving 4 bucks (not even a cup of coffee), but % wise, you save 50%.
(and yes, I go to the store regularly, so I'm not counting cost of gas in this example)
Now, if they only had the latest stuff in the streaming catalog... that would be entirely different story.
But the big draw of Netflix DVD by mail is its enormous back catalog. The size of the Redbox library pales in comparison.
I want to stream everything but I can't, so I still get DVDs. And since I still get DVDs they need to raise the price on me.
If they just came out and said "Sorry we don't have more digital content available." there wouldn't be an issue. Instead they are acting shocked I'm not satiated with their anemic online offering.
Bonus Fact: Netflix and Groupon have the same operating cost yet Groupon offers no physical or digital products.
How do you abuse a plan advertised as "unlimited"?
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Second, we are separating unlimited DVDs by mail and unlimited streaming into separate plans to better reflect the costs of each and to give our members a choice: a streaming only plan, a DVD only plan or the option to subscribe to both. With this change, we will no longer offer a plan that includes both unlimited streaming and DVDs by mail.
So for instance, our current $9.99 a month membership for unlimited streaming and unlimited DVDs will be split into 2 distinct plans:
Plan 1: Unlimited Streaming (no DVDs) for $7.99 a month Plan 2: Unlimited DVDs, 1 out at-a-time (no streaming), for $7.99 a month.
The price for getting both of these plans will be $15.98 a month ($7.99 + $7.99). For new members, these changes are effective immediately; for existing members, the new pricing will start for charges on or after September 1, 2011.
Now, we'll be paying $17.99.
That is a very significant increase and very unfortunate.
I don't begrudge what they're doing: Weaning you off your DVD habit and onto their streaming service.
But I just think they are jumping the gun. Get some more first-run content available first.
As it is, I'm going to take it on the chin and pay the extra $6, but with a lot less love for Netflix, for at least a little while until I forget about this.
Neither would I, if they weren't REDUCING the streaming service from my perspective. Dozens of movies on my streaming queue have disappeared before I could get to them - something I didn't mind so much so long as I could at least get the disc version.
General consensus seems: if pretty much everything were available streaming, fine - but it's not, and it's that "not" part which is small enough to make the DVD plan too expensive yet the content is personally important enough that we'll pay anyway.
A lot of the decent newer movies on their service come from their contract with Starz to stream any of the movies currently playing on that network.
Well, Starz only gets movies for a certain period (same as any other TV network). So when the run is over on Starz, it's removed from netflix as well.
This isn't the entire story, but I've found 9/10 of the movies that are removed from my instant queue are because of this.
They just increased my bill by ~60% (9.99 -> 15.98), I use streaming for the most part and order DVDs when they don't have the movie for streaming.
At this price point I might as well go with Vudu or some other streaming service
You may have to wait a day or two for ILL or movies to get to your local branch if they don't have what you're looking for right there. There's also going to be an online listing of movie that are available in the catalog, unlike most of the now defunct movie rental places.
I actually think keeping the DVD by mail with netflix and using another streaming service will probably work best for me, most likely I will just cancel netflix before the change and pay for a month whenever I want a DVD I can't stream.
I really didn't realize how good I had it when I lived a block from Scarecrow Video in Seattle.
- I can reserve online and they'll get it from any library in the network.
- Generally get new release DVDs much faster then Netflix
- Get entire seasons of TV shows at once instead of a disc at a time.
- Free
The big negative is I have to actually go and get them, but I generally pass the library daily, so it isn't that big of a deal.
It also looks like the meat of the customers are in these lower end plans.
I have no intention of passing Netflix on as just another cable bill.
We need more innovation in this space.
at the very least, they could have thrown in some good news about how they are increasing the quality of each service by adding a ton more stuff to netflix instant etc.
If they think this price increase is enough to stay afloat, honestly, I'm impressed
http://money.cnn.com/2011/07/08/technology/netflix_starz_con...
On top of that, Redbox would let you get four movies on a Friday night to watch Friday & Saturday while Netflix would require you to watch movies during the work week (to keep the price per disc equal, at least).
The instant viewing section is almost unusable since they launched their layout redesign in early June. The only logical explanation for introducing such a poor UX is to restrict users from accessing content in the first place, to reduce costs.
There continue to be a substantial number of complaints following that redesign, to which Netflix never adequately responded. Now they are raising prices on an already reduced customer experience. It's possible that Netflix could have gotten away with raising prices (with a reasonable explanation for doing so), but this change is happening in a broader context where Netflix is essentially taking its customers for a ride.
I suppose I could be completely wrong. The redesign might offer a wonderful experience that somehow I can't grasp. But that seems unlikely.
People can complain all they want, but the price increases are necessary.
I am currently paying for 2 DVDs at a time plus streaming, for $14.99/month. According to the recently updated Your Account page, this will cost $19.99 in a few months, a price raise of 33%.
Not as dramatic as the rise mentioned in the announcement - so why not mention that? Why make me hunt for how much other plans will be changing?
edit: clarity of second sentence.
Netflix streaming is great and it's turned this once illegal downloader into a consumer.
Im sure in the future they will offer high priced streaming plans that offer more, but of course not too much more. Understandably Hollywood does not want to cut off a huge revenue stream and all of us entrepreneur are smart enough to know this ... the general public not so much.
BIG QUESTION: how will Netflix handle the distribution of rather large queues now? We've spent quite some time assembling three queues (2 DVD and 1 streaming) totaling some 400 movies, and will be quite cheesed off if 2/3rds of it disappears just because the service provider encouraged/forced us to switch plans.
For heavier consumers though, $16 + a cheap Netflix streaming device is still a steal compared to satellite/cable and movie channels.
Now consider the price of HD streaming The Office Season 1-6 on Netflix, $7.99/mo.
Thank you, Netflix.
http://www.nbcuniversalstore.com/the-office-season-1-6-dvd-g...
If I used the DVD plan to fill those gaps, I would be annoyed too. But I don't, I only use streaming. I suspect the majority of users were either overwhelmingly streaming or overwhelmingly DVD oriented. The cost to fill the gaps for those users wasn't adequately covered by the $2, and since they were the minority, they put a wall between the services.
My point was, I still perceive $7.99 unlimited streaming as a great value for the product. Gaps and all.
I'm assuming they'll be watching the numbers for DVD rental drop until it no longer makes business sense to offer that service.
http://www.bathouselabs.com/archives/yes-netflix-raised-it%E...
Yes, shipping pieces of plastic around is the way of the future.
http://news.ycombinator.com/item?id=2334332
Although I still find it hard to believe this is economically viable.