Tag Archives: Justification

Understanding Netflix’s New Price Plans

Netflix is changing their plans and prices...
Netflix is changing their plans and prices...

So today Netflix announced that they are starting new price plans. The plans become effective immediately for new customers and begin on Sept. 1st, 2011 for existing customers.

So what’s the deal?
— Price plans are broken up into 2 groups:
1. “Unlimited” DVD-Only — Starting at $7.99 (for one-out-at-a-time and NO streaming)
2. “Unlimited” Streaming-Only — Starting at $7.99 (no DVD’s)

Why is this a big deal?
— For new customers, it probably isn’t an issue due to the “You don’t know what you’re missing” effect… But for existing customers, this is quite a drastic change!

For existing customers who have/had both Streaming and DVD (one-out-at-a-time), the price was $9.99, but under the new plan it will be $15.98 (DVD @ $7.99 + Streaming @ $7.99 = $15.98).

How…Why…Huh?!
— Yeah, that’s what I said, so I read their blog –> here and found out for myself… To save you time, I’ll summarize:

Netflix is changing their plans because they didn’t expect both the streaming and DVD delivery to be so popular. People were taking advantage of both and it was cutting into their profits. As a result Netflix is changing things so they can make more money and continue to grow — and I’m sure provide everyone better service or something…

Their Justification?
— Apparently the original plan was to introduce Streaming and change the DVD shipments to a $2 add-on. My guess is they figured DVD rental was on its way out the door and everyone would migrate to streaming-only over time, but of course that proved to be wrong and DVD rentals are still a big thing.

So now they want to cater to 2 different markets — Streaming only and DVD only.
And if you are in one of those categories, you’re golden! (DVD-only customers are essentially going to save $2/month now vs. what they would have paid)

I think they should have done the plan like this:
— Streaming only for $7.99 w/DVD add-on for $2 more
— DVD only for $7.99 w/Streaming add-on for $2 more

This way everyone is happy and it wouldn’t be a drastic change that pisses off your customers… Just saying…

**UPDATE**
What does this mean to you (besides the Money issues)?
Pros
If you are a fan of the streaming, this probably means they will put more emphasis into getting better quality and newly released movies available for streaming (they better or this will be a major flop).

If you are a fan of the DVD rentals, this is good news because it means they are committed to a long-term DVD rental approach, so you wont have to worry about switching to streaming any time soon.

Cons
If you’re a customer who takes advantage of both DVD rental and Streaming, this means you’re going to pay an extra $6 each month for this “luxury”.

**UPDATE-2**
In Defense of Netflix (more or less)
Here is a nice quote from my friend Brian:

I think a lot of the problem is the companies producing the movies hate Netflix with a passion, because the service is seriously eating into their DVD & Blu-Ray sales. I saw on CNN today that a lot of movies disappeared from the streaming service thanks to a licensing issue with Sony Entertainment. Some of the movie publishers have stopped making their movies available to Netflix even for DVD rental until a month after they’re available for purchase in an attempt to get people to buy the movies instead of rent them. I think this plan change is just Netflix’s way of attempting to deal with the way they’ve been treated by the movie industry while trying to remain profitable.