Netflix's 'bonehead' price hike: Winners and losers
The popular movie rental and streaming service raises the cost of membership by 60 percent, upsetting customers — and possibly the U.S. Postal Service
On Tuesday, Netflix announced a sharp, unexpected price increase. A combo plan, which allows customers to receive one DVD at a time in the mail from a library of some 120,000 titles, and instant internet streaming of 20,000 movies and TV shows, currently costs $9.99 a month. Starting September 1, such a plan will cost $15.98. It'll cost even more if you want more than one DVD at a time. The company will also begin offering DVD-only or streaming-only plans for $7.99 a month. Naturally, the price hike, which some have deemed a "bonehead move," has elicited an outcry. Here, a brief guide to the winners and losers:
Customers who just want DVDs"The only consumers who will benefit from this change are those who wanted Netflix DVDs without streaming video," says Eric Blattberg at Wired. Now that Netflix has separated the streaming and DVD plans, users who just want one DVD at a time will only pay $7.99 per month. Under the old plan, their only option was to pay $9.99 for a plan that also included streaming.
DVDsThis proves that DVDs aren't quite dead, says Blattberg. Previously, Netflix refused to offer DVD-only plans, "but apparently all those proclamations of 'the DVD is dead' were premature."
ZedivaThis could be a win for the buzzy new service that streams new-release movies for "$2 a pop," says Blattberg. Zediva is currently entangled in legal battles with the Hollywood studios, but if it can overcome them, it "will likely profit from Netflix's latest price hike."
NetflixThis could very well be a losing move for Netflix, says Daniel Indiviglio at The Atlantic. Many customers might choose to drop the streaming service, which can still be buggy and doesn't offer as many titles. If they do, Netflix will see a big decline in revenue. And, while Netflix has typically been a darling of investors, this move might shake their confidence in the company, especially if revenue drops.
ConsumersThis basically "amounts to a giant price hike" with "no added value" for consumers, says Indiviglio. It's "terrible timing." The economy is still faltering and many are pinching their pennies.
The U.S. Postal ServiceIt's unlikely to complain publicly, but the U.S. Postal has got to be reeling, says Dan Primack at Fortune. Last year, Netflix CEO Reed Hastings said that the company spent between $500 million and $600 million annually at the post office. That's a huge share of the Postal Service's total revenue, and Netflix was on target to spend even more — $660 million — in 2011. With the new pricing plan, I assume there will be fewer DVD subscribers and less money for the Postal Service. "Get ready for stamps to cost a little bit more… "