Fast Company

Dear Netflix Subscribers: Stop Whining

Consumers are reacting to price increases on Netflix the same way Tea Partiers are likely to react if the government raises the debt ceiling. Hysteria over the new subscription plans is off the charts--news outlets have juiced up the story by highlighting the outrage of subscribers and referring to Netflix CEO Reed Hastings as Greed Hastings. (Clever.) On social media, the tone is of course overwhelmingly negative; droves and droves of people have taken to Facebook and Twitter to complain.

Two words of advice: Calm. Down. (Better yet: Stop. Whining.) Changes to Netflix's prices were inevitable, and frankly, not very painful.

Let's start by explaining the changes. Netflix plans start at $7.99 for streaming-only subscriptions, meaning customers will only have access to content online; for only $2 more, members could also have access to DVDs by mail, one out at a time. Soon, these two services (streaming and by-mail) will no longer be bundled together for $9.99. Instead, customers can either purchase a streaming-only plan for $7.99 (the same as before), or a DVD-by-mail plan starting at $7.99 (technically cheaper than before). If you'd like to have access to both services, it will cost you roughly $16--a 60% price hike from the original price, as many have pointed out.

That 60% leap in price only amounts to a $6 increase per month. That's about the same cost as a Starbucks Frappuccino these days. Over the course of the year, that number certainly adds up--to about $190 annually up from $120--but it's still a remarkable value.

If the price tag has become too expensive for those accustomed to paying $9.99, well, feel free to pay less. It costs just $7.99 for either a streaming-only plan or a DVD-by-mail plan. If you want both, you have to pay for it--you can't have your cake and eat it too, in other words.

The truth is it's not Netflix that's being greedy but Netflix's customers. For the original price of $9.99, subscribers had access to streaming for just $7.99 and unlimited DVDs for only $2 per month. That's not sustainable; it's estimated that Netflix spends about $1 roundtrip per DVD mailed. At the same time, customers continuously demand fresher content, and fresher content costs money. Netflix has aggressively inked deals, including with Epix and Relativity Media, and in order to sustain costs of content, Netflix must charge its customers more.

According to data by Crimson Hexagon, the social media analytics firm, an estimated 62% of commentary on Twitter was negative. I'm surprised it wasn't higher; after all, who reacts positively to price increases for anything? (Well, 23% did, according to Crimson's data, while 15% were neutral on word of the news.)

Roughly 11% of Twitter-ers indicated they would leave Netflix, while 20% said they'd leave Netflix for Redbox. Sure, Redbox is another option--but then you're getting neither DVDs by mail nor online streaming--and nothing for low subscription rates. Other options? Switch to Amazon, where you'll gain access to online content for $79 annually, roughly $15 less than Netflix's streaming plan. (However, Amazon does not provide nearly as much online content as Netflix, but no doubt you'll enjoy the benefits of two-day shipping for your Amazon Prime membership, if that's what you value.) How about Apple? Certainly that's a possibility, if you enjoy paying for content on an à la Carte basis. And of course, don't forget about Blockbuster, which smartly capitalized on the hoopla by offering free 30-day trials to consumers who can offer proof of a Netflix account.

(The other option is to not use any of these services, obviously, and go back to good ol' cable.)

My prediction? The negativity will die down, the snark will fade, and consumers will realize Netflix is still a great value, even at a higher monthly price.

[Image: Flickr user spunkinator]

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35 Comments

  • B.Petersen

    Let's see. I can pay my local cable provider $120/month to get basic cable channels like Comedy Central, AMC, Discovery, local channels, HBO, Showtime & Starz, and a high speed internet connection or I can pay $45 for high speed internet plus $16.00 for the Netflix streaming and 2-DVD package and be able to watch the Daily Show, Breaking Bad, 60 Minutes, True Blood, plus new releases and not have to surf through 60 channels of crappy cable TV and save myself $60+ a month. 

    Guess which one I am going to choose? I don't see the rate hike breaking the bank and for what I get out of Netflix combined with what I stream on-line I see the $16/month combined bundle as still affordable even for my pay scale.

    Drop kicking cable tv from my life and pocket book was one of the best decisions I've ever made. And being cable free for the last 5 years has meant I get to spend my cash on a nice meal with the lady, drink some good beer when I want and even eat a steak while I re-watch X-Files on the Netflix instant.

  • Wendy L.Morgan

    The price increase was inevitable, but their incredibly poor communication via email is my biggest beef!

    Words are free and well chosen ones make change smooth and even embraced by customers. I'm sure they pay some incredibly smart communications people, but they obviously didn't vet the email below.

    I was so bothered by the email, I actually picked up the phone to communicate my disappointment in their communication strategy. The service rep I spoke with said I was the first to call about that, but said she thought the same thing when she read the message in her own inbox. It felt weird.

    The message below made me feel; times are hard, we are all suffering. That Netflix is pinched for cash and I've been getting a free ride.

    Netflix is one of my favorite services and brands. This message did not make any attempt to keep my brand devotion and it would have been so easy to do so with a few extra words.

    Email from Netflix to customers:

    "We are separating
    unlimited DVDs by mail and unlimited streaming into two separate plans
    to better reflect the costs of each. Now our members have a choice: a
    streaming only plan, a DVD only plan, or both.


    Your current $9.99 a month membership for unlimited streaming and unlimited DVDs will be split into 2 distinct plans:

       Plan 1: Unlimited Streaming (no DVDs) for $7.99 a month

       Plan 2: Unlimited DVDs, 1 out at-a-time (no streaming) for $7.99 a month

    Your price for getting both of these plans will be $15.98 a month
    ($7.99 + $7.99). You don't need to do anything to continue your
    memberships for both unlimited streaming and unlimited DVDs.

    These prices will start for charges on or after September 1, 2011.

    You can easily change or cancel your unlimited streaming plan, unlimited DVD plan, or both, by going to the Plan Change page in Your Account.

    We realize you have many choices for home entertainment, and we
    thank you for your business. As always, if you have questions, please
    feel free to call us at ....."

  • craigs

    We have been a Netflix customer for ten years.In those ten years, our needs have changed as our household has changed.Our early Netflix experience was tied to how much free time we had, not how much money we wanted to spend.Today, we have children and a constant reprioritization on where to put our attention and eyeballs.The Netflix price increase was the wake-up call to terminate our Netflix account since DVD’s sit on the coffee table for ten days at a time and an Instant queue filled with B-side movies no one desires to watch.Tomorrow, we will leverage on-demand, pay-per-view by our satellite provider or in-store, check-out kiosks as our at home movie experience of choice.

  • adam kruvand

    Srsly ppl?  It is still a good deal if you use the service.  How else is Netflix gonna pay $1.8B in licensing fees in 2013?  It has to get a lot more expensive yet. 

  • Ben Simerly

    Austin, yes we are whining, because while $6 a month isnt much compared to what we spend on our tv;s and other devices as one person pointed out, it is a dick move.  Netflix forgot something very key when they jumped prices 60%, that customers don't like it when you piss them off.  Im sure many people who claim they will drop netflix, wont, not immediately anyways.  But as the industry grows over the next few years, lots of people who would have been loyal to their beloved netflix, wont be anymore.  Netflix succeeded by spreading through the love of its fans, and if it fails it will be by the hate of its used-to-be fans.  Do right by your customers, or in the long run you fail.  Its just that simple in business.  Unless you have a monopoly and lots of lobbying money, then you can do whatever you want, and in the bigger picture, netflix wont have a monopoly for long...Their day is coming, so they can embrace their customers, or push them away to where they were before netlfix, which is exactly what they are making people consider. 

  • Stuart Bogue

    If it isn't worth it,don't do it. It's just movies(no matter how big of a fan we all may be) ,not food,gas or even your broadband. Those items are important. For business,health and family...Raise hell about that.....If the streaming content is old and tired,and not improved despite the price increase,then don't buy it,at any price. If the mailed dvd's are not your cup of tea,then don't buy it. whatever their profit,whatever they use the money for is immaterial. If the service is not a good value,go elsewhere. I think the real anger comes from the fact that even after an abrupt 60% increase,NetFlix still represents a good value and despite all anger,will still represent the best option for most of it's customers,for the same reasons it was  a good option before the increase. Which was the point of the article....

  • Donnie Gladfelter

    When I first joined Netflix the price was $16 for 3 DVD's (unlimited) at a time. Let's say one could watch 5 DVD's per allotment/month. Using your $1 per shipment number, that stands to reason limiting to one-at-a-time saves Netflix $10 (5 DVD's x 2 allotments x $1 each) per member over their initially successful pricing from the mid-2000's.

    So for 1/2 ($8) their initial ($16) DVD-only pricing model I can get 1/3 the DVD's I once did. After all the $16 3 at-a-time unlimited plan was offered pre-streaming, so I'd say we're comparing apples-to-apples here. My point here, this isn't the start of Netflix's greed, but rather it's continuation.

  • CJ

    To me, this whole debacle illustrates a key misunderstanding in the way Netflix and I see our plans. Netflix saw me as having an $8 streaming plan with a $2 DVD-by-mail add-on. I saw it as a $10 DVD-by-mail plan with free streaming. I really don't have a problem bundling the services, IF the second service was worth adding, but for my tastes, Netflix Instant simply isn't worth paying for.

    In light of all this, I actually bumped my plan up from one DVD at a time to two and I figure, between Redbox, Hulu (and Hulu Plus, if I decide to try it), VODU and what my cable company offers on demand, I'll have plenty to watch.

  • Terri Coop

    Okay, other than the ridiculous photo and somewhat condescending tone of the intro, this was a good article and, yes, you certainly could have done better than the ham-handed tin-earred announcement that Big Red dropped the other day.

    I am exercising my right as a consumer to call them out on that. First, customers built Netflix by word of mouth. When my local vid store stepped in it for the last time, I told everyone who would listen that I was switching to Netflix and helped them sign up. I gave gift memberships. Heck, last Christmas I gave wireless modems, Roku boxes and gift cards for Christmas.

    So, repay me with some honesty. Do not tell me that your extensive research tells you that this is what I want and that it is good for me. eBay tried that and they are a tarnished dinosaur hiding in the tarpit behind the smoke and mirrors of PayPal.

    Then this dropped . . .

    1. This is not about funding new content. The content in the US will not significantly improve.

    2. This is about funding Big Red's Canadian, Caribbean and Latin America expansion. All of the currently licensed content has to be licensed again for new markets. Yeah, I gotta problem paying more so Bolivia can stream Knight Rider. Hastings said Americans were too "self-absorbed" to notice what was going on internationally. Guess what, I noticed. Also, there's Swasey's "let them drink lattes" blunder.

    3.  Big Red is in some non-trivial cash flow trouble. Some analysts estimate they have off-the-balance-sheet obligations as high as $2 billion. So, this price hike is not about buying new, it is about bailing out old. Somebody wrote checks and now it is time to cash them.

    4. Netflix is feeling the effects of its reckless price war with Hulu. As another poster said, how can I be greedy for paying the bill presented to me. Netflix decided to race Hulu to the bottom and then realized the view from down there is not so hot.

    5. There is more fine print to the deal. I maintain an account for a disabled family member. It is very important to him. I also like to stream for a couple of hours a day while I work in my home business. No more. Streaming is being throttled to one device. So, I will need two streaming accounts and a DVD account to maintain my present service. That is $24/month before tax. I live in a small town and we don't have a Starbucks. But, that's four lunches at the diner down the block.  

    So, Netflix mismanaged its business and wants to fix all of its problems in one shot. They made it clear that they don't care if they lose business to do it. Not all that sure I want to do business with a company like that. Big Red also threw away its single biggest asset - customer inertia. People are waking up and examining their viewing habits and discovering they have options. For myself, I will keep one streaming account for my family member (the change would be too hard on him). For myself, I am giving Hulu+ a trial run. They have the kind of programming I like. If I want DVDs, I am going to Blockbuster. Yes, it's a couple of bucks more. This is not about the price increase, it is about the attitude. Going to Blockbuster gets me new movies quicker, the occasional game and, best of all, it fosters competition. I think some solid competition will do Netflix some good.

    You want to stay? Fine. But, do not call my outrage whining. Show some respect.

  • Robert

    This is my opinion on the uproar.  The average American has either gotten smaller raises than usual over the last few years, not gotten a raise at all(like me) or unemployed.  Yet gas, health costs, taxes, and education all have went up.  There is very little that we can do about the above costs rising because we have no choice in them .  However Netflix raising costs 60% during a time when so many are suffering is a way for us to kind of say no more.  I am dropping the service although I haven't been on one website to complain or "whine" until now and I consider this more about explaining the uproar than me officially whining.  I guess I could afford the extra $6 but I have a hard time paying 60% more when I look at my life I am financially the same or maybe even a little worse off than I was 5 or so years ago I want somebody, anybody to say "hey I feel your pain we are all making sacrifices and I am willing to too to make your life a little easier"  Instead Steve Swasey comes out and says something about a latte or two less a month, well Steve a lot of us haven't had a latte in a long time.

  • acarr

    Great comments, all. It's very interesting to hear your thoughts. I agree that $191 vs. $119 is a big increase for the full year -- I'm not judging anyone's issues affording that in a tight budget. 

    At the same time, Netflix cannot offer such an inexpensive service forever if it hopes to provide unlimited DVDs and fresh online content. To sustain its business, price increases had to be made.

    However, if you cannot afford the increase, there are cheaper alternatives -- with either the streaming-only option or DVDs-by-mail option.

  • John Sereno

    Maybe it's greed affecting my memory, but Netflix recently raised their prices. 

     It's obvious that their original business plan mailing DVD's was successful as they have grown into an economic powerhouse. As a long-time customer I like the streaming video, but really as a bonus value to my DVD plan. The  quantity and quality of titles is anywhere as comprehensive as the DVD offering, and Netflix seems to think everyone in America has a high-speed internet connection making DVD's unnecessary.  Here's the other part of the equation - how long with the streaming business continue to grow when internet providers keep raising prices for their services?  Netflix - don't kill the goose that laid the golden eggs, and forget your original customer base. 

  • Eric Rice

    I think the real nugget is in here.

    Netflix is increasing costs for people who want both plans by a few dollars a month. But, it's not a 60% increase when put in context of the entire set of services and equipment necessary to use the streaming service. Consider, I pay ~$35/month for my broadband service, plus fixed costs for equipment (maybe $100 total for my modem and wireless router), $200 for the boxee I watch netflix on, $100 for the DVD player to play their discs, and $500 for my TV (which is on the low end). If you watch on a computer, that's $500-$1000 average, which is roughly equal to cost of TV+internet box. So, assuming a roughly 3-year lifetime for most modern electronics, and not discounting for other value I receive from those things, that's a monthly cost of $35 for internet, ~$25 for equipment, and $10 for Netflix = $70/month. So, it's more like an 8% hike in total price to use the service, even smaller if you account for all the services one buys for entertainment in general. If someone is stretching for $6 a month, maybe they need to consider cutting back on things like internet-enabled TV purchases before getting up in arms about the marginal price of a non-essential entertainment service.

    Put in another context - $16 isn't even 2 movie tickets at current prices, or 4-5 video rentals, if you remember back to the days when we had to drive to Blockbuster and pick from 40 copies of the latest summer hit and a few rows of popular movies that some marketing guy thought might move enough to make money. I get WAY more value than that out of my Netflix membership. In fact, I use their streaming service so much, I'm a little worried about the current trend of internet providers capping or throttling heavy users.

    So, sure, $6 may seem like a large price hike in a very limited context, but it's really almost nothing in a more appropriate context, and still a fantastic value all around. And, while Netflix may not have had the nicest press release about it, maybe people in this country should get over this desire for companies to coddle and coo and spoon feed, and instead apply 30 seconds of critical thought rather than getting absurdly upset over a couple of dollars.

  • WILLinCHICAGO

    The real problem with the argument of "$6 isn't much money" is that it is not a sustainable defense across the board.  If every vendor I use increased their fees by $6 each month, it would be substantial.  Let's say I buy from 40 different companies each month, that's $240/month in increases.  Most Americans don't control their own incomes and can't easily add $240/month to their incomes.  (Obviously, entrepreneurs, business owners, salespeople, etc. do have the ability to potentially increase their incomes, but not the average American.)

    So, honestly, I agree that $6 isn't a lot of money.  However, if every time a vendor increases their monthly fees by $6, we take this approach of "oh, well, it's cheap," it will only hurt us in the long-run.  Look at all prices that are going up across the board.  Commodities, including gasoline/oil, have increased and continue to do so.  If the prices for everything keep going up, we'll end up like Zimbabwe, with insane inflation.

    Taking a stand to try to suppress price increases isn't a bad thing.

    I own a service business, and we've had to decrease our prices by 24% in many cases in order to keep some clients.  Netflix doesn't have to raise their prices.  They are just being pressured to by Hollywood.  And, they should be negotiating lower fees in Hollywood instead of accepting higher fees and increasing prices to consumers.

    Will

  • cutensmart

    I already have Amazon Prime and have unsubscribed Netflix long ago. I was kinda debating to join the terminated 9.99 plan that provides DVD+instant streaming. What I have found is that the selection as well as new addition of instant movies and tv shows is horrible in both though Netflix is probably 30% better in total(of all the movies and shows) compared to Amazon Prime(that effectively translates to 5% better on the types of movies I watch, probably that is true for anyone else unless (s)he is a movie addict and stream like more than 6 hrs every day). So I only care about the movies I can't watch on Amazon but can on Netflix. I now subscribe to Netflix a maximum of (0 to) 1 MONTH PER QUARTER, when there are enough interesting new additions accumulates and manage watching those during the 1 month period of my subscribtion. In effect, Netflix is getting less money from me per year.

  • Robert Meredith

    I just signed up for NetFlix's streaming service. I didn't even realized it existed until all of the publicity.

    As for the rest of you whiners, stop your crying. An extra six bucks to get DVDs to your house and unlimited streaming? Sounds like a great deal to me if you're that heavy into watching movies. If not, pick one of the $8 a month plans. Do you really need more?

  • cutensmart

    Not sure what kinda world you have been living yet. Instead of calling others whiners take that time to update yourself to at least year 2008. Now please don't say, now that you have Netflix streaming, you'll be watching the movies at the public library using the free internet because you are allergic to the sound of the dialing modem at home. 
    You'll certainly finish up watching the movies of your interest in 2 - 3 months(unless you are gonna watch anything or everything available for streaming) and then will ponder if it is worth spending $8 for the horrible additions they  have every month. Make sure you unsubscribe and resubscribe after your initial Netflix honeymoon, that way you'll save some money and will be efficient during your subscription period.