Netflix movie selection doesn't seem to be great. In my case I subscribe to it for the TV shows more than anything else and for $8/month, the cost is easy to justify. YMMV.
I see Netflix's problem as this:
- Hollywood increasingly sees Netflix as a problem rather than an additional avenue for revenue. The studios may be concerned about creating another iTunes (virtual monopoly);
- Studios and distributors increasingly want to go on their own, which is really bad for consumers and seems to be driven by simple greed of cutting out the middleman without realizing what that middleman is actually doing for you;
- Netflix uses Amazon for scale. This is a problem. As much as burst architectures have theoretical advantages, the costs just don't add up beyond a certain size. I cannot believe that Netflix isn't at the point where they'd be better off owning their own servers;
- There's no offline viewing. IMHO Apple will increasingly address this market. Netflix needs to as well. When people are mobile they usually don't have a sufficient data connection, particularly if on a train or plane.
Netflix seems to want to go the HBO route of creating original content. This is an incredibly dangerous game to play with them forking out big bucks [1]. At least AMC's content in comparison is relatively cheap to produce and they have a relatively stable income due to cable bundling (although they're struggling with rising costs of Mad Men).
EDIT: Let me clarify. 2012 price hikes don't drive consumers. Current value and current price hikes drive consumer behaviour. The recent price hike in DVD+streaming will no doubt have caused some to drop the service. They could drop either streaming or DVD or possibly both.
I'm inclined to believe that DVD is an ever-smaller piece of their business but it may yet be significant to have a real impact on subscriber counts (in terms of subscriber loss).
[1]: http://www.reuters.com/article/2011/03/21/idUS17633242872011...