Customers Outraged at New Netflix Pricing, Investors Giddy
July 14, 2011 12:30 PM
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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
7/15/2011 9:46:57 AM
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
7/15/2011 9:55:38 AM
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
7/15/2011 2:22:34 PM
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.
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