Print 63 comment(s) - last by The Raven.. on Jul 18 at 3:00 PM

The price hike and change in service plans are not sitting well with many Netflix customers, but Netflix already knew this would happen

Two days ago, Netflix announced that it would change its pricing and plans associated with its DVD rental and video streaming services. These changes include separating DVD rental from video streaming entirely, charging $7.99 for one or the other. For both, the cost is $15.98 (the current price for one DVD out at a time and unlimited video streaming is $9.99).

The price hike and change in service plans are not sitting well with many Netflix customers, but Netflix already knew this would happen. In fact, one day before announcing these plans, Netflix told customer service representatives to be prepared for angry callers.

Today, the company even increased the number of personnel in the department to handle the amount of phone calls they've received. "Hundreds" of Netflix employees have been answering phones, and this still caused some callers to have to wait to speak to an employee. The sales representatives have said that many of the calls have been "emotional."

"We tested, we researched, we analyzed," said Netflix spokesman Steve Swasey. "We knew what the reaction would be. We are not surprised. We knew that there would be some people upset by the service and with the price being adjusted."

According to Rich Greenfield, a Wall Street analyst with BTIG Research, Netflix employees have not been giving callers satisfactory responses through the day. Greenfield tested how Netflix's service department was handling the flood of calls by making over 35 calls over a two-hour time period, and said that Netflix employees simply tell customers (who threaten to cancel their subscription) to wait to cancel until September when the new plans/pricing takes place.

"There was simply no promo or 'save' technique to offer us a discount to retain our business," said Greenfield. "This would appear to illustrate that Netflix is simply not concerned with the prospect of losing customers."

In addition, Greenfield said he waited on hold for about 9 to 15 minutes while making these calls.

While customers are up-in-arms, investors are salivating at the Netflix price rise. According to Ingrid Chung, a Goldman Sachs analyst, the higher prices will make up for the cancellations by "driving customers toward more profitable Netflix plans."

"Gross margins should benefit as we believe that the majority of lower-priced (subscribers) were less profitable for Netflix," said Chung.

Chung also mentioned that "lower-priced subscribers" may be drawn to the streaming-only service as well, which could prove to be a successful shift.

Netflix shares increased three percent yesterday after the announcement of the new plans.

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They guessed wrong
By borismkv on 7/14/2011 12:40:20 PM , Rating: 2
Well, my Netflix subscription price has already gone up once this year, so I'll be ditching the DVD plan altogether and switching to Streaming only. Guess the investors didn't account for the number of people like me who were at the top tier and will be downgrading because of this.

RE: They guessed wrong
By icemansims on 7/14/2011 12:45:46 PM , Rating: 5
Actually, now you're guessing wrong.
Streaming only is more profitable for Netflix than the DVD's, since there is no physical shipping.

RE: They guessed wrong
By kingmotley on 7/14/2011 1:31:27 PM , Rating: 1
It's good to see that unlimited internet bandwidth is now free, and that you've gone through all of Netflix's content contracts and see that streaming and DVDs are exactly the same price. Oh wait, neither is true.

RE: They guessed wrong
By Milliamp on 7/14/2011 9:09:29 PM , Rating: 2
>It's good to see that unlimited internet bandwidth is now free

Actually, for Netflix it is very cheap since most of the expense is pushed off to ISP's that have to carry the data most of the distance.

Netflix is 30% of the data on ISP's networks.

RE: They guessed wrong
By steller2k on 7/15/2011 9:46:57 AM , Rating: 3
Is it really so hard to see that they want to push the majority of their customers to streaming only? They get they market numbers up and their pull with Hollywood actually increases. "If you want our subscribers to watch, you need to let us stream your movies." For me, it is an easy switch; I was on the 1 movie at a time + blu-ray for $12 a month. But in reality we almost exclusively stream content, the dvd sits around for a few weeks. So streaming only it is.

Now, who should be really happy? Redbox investors. That is where I'll be going to get all of my recent release, hi-def movie fixes.

RE: They guessed wrong
By mcnabney on 7/15/2011 9:55:38 AM , Rating: 2
It is very rare for me to find the movies I want to watch on Streaming.

Sure, I can stream all of the Phineas and Ferb as I want, but the disk I have right now - Battle: Los Angeles, is streaming only.

Their DVD options are like a buffet - everything is there. Streaming only offers what was cheap to license. So don't expect any new releases.

RE: They guessed wrong
By Souka on 7/15/2011 2:22:34 PM , Rating: 2
It would be super cool they had a streaming + 1 or 2 rental per month plan.... they could put the word "hybrid" into the title which is an excellent marketing term these days.

My $.02

RE: They guessed wrong
By aharris02 on 7/14/2011 1:37:32 PM , Rating: 2
Wrong. Streaming is currently more profitable than DVD because the licensing costs are lower for Netflix because movie studios didn't take streaming seriously when Netflix proposed the original contracts.

Now that the studios have seen the demand for electronic distribution (they must have some serious effing blinders on to just now be noticing consumers want this feature...), expect Netflix's licensing costs to skyrocket. One article estimate (probably pulled out of the author's ass) a 10-fold increase in Netflix's pricing on those contracts... but either way the license pricing is going up.

RE: They guessed wrong
By tng on 7/14/2011 2:03:42 PM , Rating: 2
Combine that with data caps that will come from ISPs like Comcast and Time Warner who want to sell their own product and I can see Netflix getting really spendy.

RE: They guessed wrong
By rocketbuddha on 7/14/2011 2:18:50 PM , Rating: 2
Agree. With the studios having smelt blood, they are trying to extract maximum costs from Netflix which in turn makes Netflix increase the price to its customers.

I remember that HBO senior official was saying something like "NFlix streaming prices are a joke! They are too cheap. Our customers perfer exclusivity even if expensive".

So going forward I am guessing with the new contracts, the licensing costs have sky rocketed. Add to it the hosting to serve to millions of connected devices including Media Players, Smartphones, Blu-ray players and with ISPs wanting to have a share of the revenues generated thru heavy traffic, I can understand that the so called "cost benefit" over the mail DVDs has been significantly reduced.

I am ambivalent about the price hike. Currently I am on a Account hold(2DVD + UL streaming variety) till mid september and have not decided what I will do. Comparing against other on-line streaming services, I find Netflix to be far cheaper inspite of the lack of latest movies. If Amazon is able to get equivalent titles (in the future) then may be the PRIME + streaming is something I can think about. Add to it NFlix has absolutely no commercials while Hulu+ has I cannot see the value the latter offers.

Well if Netflix does the following
a) Expand the movie titles.
b) Add sub-titling as a option and make it available even to non-PC devices.
c) Improve the sound quality vis-a-vis blockbuster instant videos

I would not mind continuing with them. I have a Samsung BDP1690 (while it is a poor QC device, I have to un-plug the device after few days so that it behaves properly). It can access 4 internet streaming services

I have only used BB feature to view the various trailers. I have it connected to my Pio VSX-520 5.1 HT system with. I find that for the same amplitude level, the sound is louder and more richer in the BB Trailers and the picture little better too.

But the reason that they gave in the blog is soooo...o lame.
They should be frank in saying the obvious in a diplomatic manner.
" Hollywood basically wants to extort us and our customers to provide the streaming service."

RE: They guessed wrong
By mcnabney on 7/15/2011 10:08:25 AM , Rating: 2
Don't believe the Netflix lies.

They have Hollywood by the short and curlies.

Hollywood paid them an enormous amount of cash to just 'delay' when they would offer movies. If a studio asks for more money in licensing fees, Netflix could just as easily not license ANY of the studio's back-catalog. They have enough users that they can set the terms for licensing.

RE: They guessed wrong
By borismkv on 7/15/2011 1:53:44 PM , Rating: 2
Really? So me going from a 20 dollar a month subscription to an 8 dollar subscription will will be *more* profitable for them? You're a democrat aren't you...

RE: They guessed wrong
By medavid16 on 7/14/2011 12:51:01 PM , Rating: 5
you're doing everything they want you to do... i'm just going to cancel altogether and spam all my networks to dump them. Stream what, old content that I've already seen? F netflix

RE: They guessed wrong
By quiksilvr on 7/14/11, Rating: -1
RE: They guessed wrong
By Brandon Hill on 7/14/2011 1:07:02 PM , Rating: 5
Their streaming movie library is pretty crappy. Whenever I have an urge to stream a particular flick that I'm in the mood for (even hugely popular films), all I see is "Available on DVD only"

RE: They guessed wrong
By JediJeb on 7/14/2011 1:13:34 PM , Rating: 2
But the question I want answered is, "Who else do you go to if you want to stream with a selection better than Netflix?"

Everyone here talks about crappy selection and canceling their service, but none ever say where they will go to get the same level of content.

RE: They guessed wrong
By Taft12 on 7/14/2011 1:22:11 PM , Rating: 5
That's because the alternative internet-based service is less, how shall we say, legitimate.

RE: They guessed wrong
By Wiggy Mcshades on 7/14/2011 1:43:22 PM , Rating: 2
I'm gunna guess they either use the less legitimate service, or just do something else besides watch a movie/show. it's just a way to blow time, it's not like anyone needs the content netflix is offering.

RE: They guessed wrong
By Samus on 7/14/2011 2:30:59 PM , Rating: 1
The important thing about the streaming library is that they get TV shows available on it. There is demand for that (look at Hulu.)

RE: They guessed wrong
By rudy on 7/14/2011 7:57:10 PM , Rating: 2
That is because we don't need that level of content. What is the point in old reruns and really old movies I have already seen all of them. I need new stuff and not just a select few items. Me personally I was just about to upgrade to DVD service because I had run out of things I cared to watch streaming. So now if I look at it I can probably just drop netflix all together and go with redbox for cheaper.

RE: They guessed wrong
By nafhan on 7/14/2011 2:07:07 PM , Rating: 2
At the same time... it's good enough of a selection that if I just want to see something interesting that I haven't seen before, I can usually find something without much of a problem. This puts it on at least equal footing as basic cable with a significantly lower cost (IMO).

RE: They guessed wrong
By inperfectdarkness on 7/14/2011 3:22:14 PM , Rating: 2
try streaming ANYTHING with the word "star trek" in the title.

selection is piss-poor. f**k netflix.

RE: They guessed wrong
By nafhan on 7/14/2011 3:43:59 PM , Rating: 2
Interestingly, I looked at this yesterday. They've got all the TV shows except DS9. At the same time, "how much Star Trek do they have" generally isn't going to be a deciding factor in these types of things for me...

RE: They guessed wrong
By wrekd on 7/14/2011 3:52:35 PM , Rating: 2
Hmmm I just started the Voyager series, and TNG is on there too. They also stream the recent Star Trek reboot and seasons 1-3 of the original series. What issues are you having?

RE: They guessed wrong
By Chernobyl68 on 7/14/2011 7:08:55 PM , Rating: 2
season 1-3 IS the original series.

RE: They guessed wrong
By omnicronx on 7/14/2011 1:53:55 PM , Rating: 2
Actually I'm guessing this is exactly what they were thinking. I'm going to guess that a lot of Netflix users flat out don't use the DVD service (i know i don't). As a result the shift is easy for these customers, merely shift your account to streaming only service and you were right back where you started.

They are not losing money as you are still paying the same amount as you did previously, while profiting on those that use (and will continue to use) the entire service.

RE: They guessed wrong
By mattclary on 7/14/2011 2:34:16 PM , Rating: 2
so I'll be ditching the DVD plan altogether and switching to Streaming only.

Pretty sure that is their plan. It's a lot cheaper for them to provide streaming to you than DVD shipments.

RE: They guessed wrong
By borismkv on 7/15/2011 1:56:40 PM , Rating: 2
Not when I had the 3 CD out option and didn't use it because I didn't care enough to switch to streaming only. I'll be saving about 10 bucks a month because they chose to raise my rates twice in a year.

RE: They guessed wrong
By navair2 on 7/14/2011 8:02:34 PM , Rating: 2's an idea:

Offer something to people that is irresistible, drive your competition (a.k.a Blockbuster, Hollywood Video, and every other video store) out of business, get your customer base used to the idea of easy, reliable and predictable (also known as budgetable) access to your product, and then...

RAISE THE @#$%^&! PRICES! \o/

Hey, why not...they do it with gasoline, food, clothing and EVERYTHING ELSE, why not Internet entertainment?

Greed at its very best, the CORE of inflation.

"I want more", says one guy..."why?" says the customer. "Because...I just want more, so I'm raising my prices. What are you going to do about it now that I've got you hooked?" "What CAN I do?" says the customer. So he pays more for the same thing, getting LESS value for his dollar.

Meanwhile, Greed continues ebbing and flowing, leading the poor customer by the nose until he gets so sick of it he QUITS USING THEM...

Ahhh...peace at last.

RE: They guessed wrong
By jhb116 on 7/14/2011 9:11:59 PM , Rating: 2
I'd drop them.

I think this single move is the best news Blockbuster has had in awhile. I'd rather switch over to a 25 ish plan that I can get games with as well then continue with Netflix under this new system where I have to wait to get new DVDs (sometimes weeks) and there doesn't seem to be anything current on the streaming service......

"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein

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