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  (Source: republicofaustin.com)
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: who cares
By ClownPuncher on 7/14/2011 1:15:10 PM , Rating: 4
They were a for profit company before the price hikes, too.

I cancelled because after being a customer for 3+ years, there isn't much left for me to watch. Waste of $16 a month at this point.


RE: who cares
By Taft12 on 7/14/2011 1:26:18 PM , Rating: 1
quote:
They were a for profit company before the price hikes, too.


Yes, but a for-profit company that was not all that profitable. That moment comes now that they have gained critical mass. This is why investors' pants are getting tight.


RE: who cares
By ClownPuncher on 7/14/2011 1:54:18 PM , Rating: 2
I'm not an investor, so I was never really that concerned with how profitable they were.

Now, if they offered NEW movies streaming or blu ray, I wouldn't cancel. I've basically exhausted their library at this point.


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