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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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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.

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