Netflix’s Price Increase

MATTHEW DAVID BROZIK: The new Netflix pricing structure is still a great deal. As it is, what I pay monthly is absurdly small for what I get. Granted, not everything is available to stream via Netflix, but a hell of a lot is. The subscription price (now) is reasonable for the DVDs alone. Adding streaming made it more than reasonable. So this hike (or, adjustment) was inevitable, but still reasonable.

But even if it was very inexpensive before, and now it’s an appropriate price, then what’s to complain about? A wise man once said (I paraphrase), “Don’t be sad because it’s over. Be glad because it happened.” Why would some perceive greed and attribute it to Netflix, rather than to the consumer who wants a lot for a little?

Some are disappointed by the pricing change. Disappointment is the result of one’s expectations being unmet. Many came to expect something—prompted by getting Amount X of product for Cost Y for Time Z—and now they can’t get that anymore, so disappointment is natural. And, immediately, it’s Netflix’s fault. That is, consumers expectations didn’t change, but rather Netflix is no longer going to meet those expectations. I’m not suggesting that this disappointment makes anyone greedy; I’m suggesting that Netflix is not being greedy. Netflix is doing what it feels it must to maximize its profits, as any business should (while not alienating its consumer base… which it is taking a risk of doing, of course). Netflix can’t publicize the new scheme by asking consumers to look back on all that they got for so little cost until now… that would just piss people off. (But it would be an interesting strategy. “Dear Netflix User: We regret that our new pricing arrangement, coming September 1, will likely come as a disappointment to you, but if it helps any: Remember how cheap our services have been until now! Right? Wasn’t that great?”)

Others might not be very troubled by the new scheme, as a great deal of content (of the sort that Netflix streams) is available via torrents online. Some might now simply download more shows and movies illegally. How can Netflix possibly argue with that? It isn’t Netflix’s job to provide a service in order to curb online piracy; if being able to get content through Netflix in fact decreased piracy online, then that was a positive by-product. Unfortunately, Netflix has to compete with illegal activity, and it is damned easy to get the same content for free, even if it might (or might not) be a little more difficult to get it.

To suggest, though (as some might) that raising prices (to still well within most persons’ means) is a poor way to go about improving a company’s profitability makes little sense. It is an excellent way. For sure, this decision wasn’t taken arbitrarily. Someone (many someones, more likely) figured out how many customers are likely to jump ship entirely and how many will decrease their subscription plan and how many will pay more. And the conclusion is that it’s worth it… or necessary, at least.

DAVE TOMAR: Well I guess that’s it.  It was nice being on the good side of the law for once.  But Netflix, you’ve pushed me back to a life of crime.  Y’know, in a way, I’m glad this happened.  It wasn’t me.  Paying for media.  It just didn’t feel right, not knowing as I did that out there somewhere on the interwebs, somewhere rather easy to find, somewhere just a Google search away, was all the exact same content and much much more entirely for free.

As a pirate of media, I have long held the belief that the internet will one day cease to be a lawless frontier where an absence of legal precedence makes all intellectual property freely available to the inquiring downloader.  Therefore, I have hoarded media by instinct, intent upon absorbing the things that I won’t be able to afford when at last meaningful corporate and government control are levied over the web.

So to pay a $9.99 a month service fee for unlimited streaming and DVD content from Netflix was somewhat out of character for me.  But it was just cheap enough that it was a no-brainer.  I’d be willing to pay that for the convenience of getting in one place all the things that I could freely download with some effort (possibly only minimal) just by looking around a bit.

And I’ll be honest, it was always a pretty good deal.  But not so good that I didn’t take notice of its flaws.  The DVD service, quite frankly, is excellent.  The selection is suitably broad, the delivery is expedient and if you are the kind of person that has the time for a lot of movie-watching, well worth the money.  Unfortunately, I’ve gotten very used to the instant gratification that media piracy enables.  I don’t want to wait three days to see Police Academy 4:  Citizens on Patrol.  I want to see it now.  And in three days, I may not have the time to watch it or the desire.

Sounds like a job for the ‘Watch Instantly’ service that comes with my Netflix subscription.  But what’s this?  I can’t watch Police Academy 4: Citizens on Patrol through streaming media?  Oh my god.  I can’t watch Police Academy 7:  Mission to Moscow through streaming media either.  Holy crap, I can’t watch any of the Police Academy movies through streaming media.  Goddammit.  Now I have to download all 7 of them for free.  Breaking the law to watch Police Academy.  How ironic…or possibly just stupid.

And now, Netflix has increased the price of its service by 60% and forced me to choose between the primitivism of the U.S. Postal Service or a streaming library that has none of the Star Wars films but does offer Getting There: Sweet 16, a road trip movie in which the Olson twins stake out for the Winter Games in Utah and encounter some “Olympic-size detours!”

I’d have to look back and confirm for sure, but I believe this is probably the single highest rate increase I’ve ever experienced with respect to a monthly bill.  Comcast, my cable provider, is a cycloptic monopoly and possibly in league with the devil.  That said, they’ve never raised the cost of my service by 60% over the course of a single month or even across five years.  Most commercial service providers engage in incremental rate increases to avoid jarring the consumer.  With Netflix, the change is more problematic than a simple rate increase.    They have structured the price hike in such a way that you are now being asked to pay roughly the same amount for half the service, whether it be streaming content or mailed DVDs.  To say that the service is worth the money isn’t really the point.

The new pricing structure forces me to scrutinize the ‘convenience’ for which I have been willing to pay to this point.  While Netflix may have its particular market cornered, its subscribers still remain a pale proportion to those who pirate free media.  As a subscriber to Netflix to this point, I am a demonstration that for the right price, a pirate can be made a law-abiding citizen.  I have yet to decide if, as of the initiation of the rate change on September 1st, this will still be true.

MOLLY SCHOEMANN: Hey Netflix, don’t stream on my shoes and tell me it’s raining. Your new, higher, “a la carte” pricing for previously combined, low-cost services is just bad business.

You could have at least given your customers the courtesy of pretending as though you aren’t trying to wring every last cent out of them, the way cable and internet providers have been doing forever: Simply let your monthly pricing creep up gradually, month by month, year by year, so that I don’t even realize how much I’m actually spending until I’m taking out a second mortgage to pay for cable. It’s like giving me a soothing backrub as you steal my wallet. At least it shows you care enough to hide what you’re doing to me from me, instead of just hiking your prices right in my face and expecting me to smile wanly and fork over the extra cash.

And I don’t buy the argument that this new pricing is fair because the original price for these services was so cheap that we should just appreciate how great that was. You’re damn right, the original price was cheap, and I liked it that way! I like things that are cheap! And I don’t need a price hike to make me realize how cheap something formerly was. You know what really makes me appreciate the cheapness of something? Keeping it cheap! As an analogy, right at this moment, I also appreciate the fact that my big toe is not throbbing in terrible pain. Should I hit it with a hammer, then, so that I can remember even more clearly how great it felt before I did that?

Nor do I understand the logic that since the price hike is only $6-7 bucks a month for the average household, it’s not such a big deal. Sure, that’s not a large amount. But when I consider the fact my monthly bill of $9.99 is going to increase by about 60%, to $15.98, and for the exact same services I’ve been getting for $9.99, I feel very indignant. No, the extra $6 is not all that stands between me and starvation. I can afford it. But is that a valid defense? That most of your customers can afford the price hike? Most of my friends can afford to give me $5 a month for the exact same level of friendship I have been providing them for years for free. But is fair for me to ask for it?

And if this price hike is because the cost of streaming is higher than Netflix originally forecast, well maybe they should have done their homework on that when they were originally designing their pricing model. That’s part of their job; to price services in a way that is both profitable for the company, and reasonable for the customer. Now I’m supposed to pay an extra $70+ bucks a year because someone in accounting forgot to carry the one?

All over the internet, Netflix customers are muttering angrily that thanks to this price hike, they have canceled their accounts, or are strongly considering canceling them. And perhaps Netflix was even counting on this. Perhaps they did the cold hard math and realized that if 40% of their customers desert them over this astronomical price hike, they’ll still be making more money than they ever were before, thanks to the revenue brought in by said price hike. But the problem is, it’s not just about the money, and you would think Netflix would know this. A big part of staying in business relies on customer loyalty. For whatever reason, Netflix customers have long tended to be extremely loyal. Perhaps it’s Netflix’s legendary customer service or their keen ability to understand the utter depths of our laziness. Everything about using Netflix IS ridiculously laid-back and easy. And those little red envelopes are so cheerful. But there is only so far these things can go, in the face of such cruel pricing practices. And customer loyalty, so gradually attained, is extremely hard to win back after a gaffe like this.

Those customers who don’t desert Netflix in droves; the ones who hang on and swallow their pride and pay the increased pricing—they won’t have the same love in their hearts for Netflix anymore. They’ll stay, but they’ll be watching the horizon for the dawn of the Next Big Lazy Movie-Watcher Service Provider. And they probably won’t have to wait long. It feels like every time you turn around, there’s a new, even easier way to rent or stream TV shows and movies.

I’m convinced that this is going to be your ‘Let them eat cake’ moment, Netflix. You should have continued to offer cheaper cake.

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