Written on Wednesday,
July 13th, 2011
Recently online streaming giant, Netflix, announced a price increase to their extremely popular streaming service (how extremely popular? How about 22% of all internet traffic in the U.S. is from Netflix) — raising their streaming only rates from $4.99 to $7.99. Netflix started off as a revolutionary DVD “rental” system relying purely on mail delivery (where you manage your queue online). At the time everyone thought it was interesting, but would never catch on or last because it’s inconvenient. Overtime they’ve proved that theory wrong (boasting 23 million subscribers and $62million quarterly profits).
The fuss comes on the heels of another Netflix rate increase (wherein the company raised the prices of their DVD services by $1 and introduced the streaming only service for $7.99 in November 2010). All that Netflix has done is eliminate their $4.99 DVD service (which gave users 1 DVD, and no more than 2 in a month), kept their streaming prices and decreased 1 DVD (as many in a month as you want – which was $9.99 and will now be $7.99). What they eliminated are the “bundle” system of streaming/DVD, clearly moving toward a more profitable revenue model, as well as moving the company and it’s users into the future of entertainment content consumption (and eliminating DVD’s all together).
As the demand for streaming content increases, so do the costs of not only providing the bandwidth to serve the content but also the distribution deals necessary to deliver timely, popular content. A recent deal struck with AMC to bring Mad Men to online streaming (no one company has been successful at inking a deal) cost Netflix an estimated $75 million. The cry for successful and popular films will no doubt have similar price tags. Add to the cost the fact that distributors are unlikely to want to eat into their DVD sales by offering streaming content after a films theatrical release. But money talks. And the best way for Netflix to grow is to expand their offerings and deliver more timely content — all of which will cost them money.
The alternative options for users is to unsubscribe and either pay per film or television show (which can cost from $5 to $75 either from Amazon, iTunes a physical DVD or a trip to a movie theatre — again, all for 1 item), stay on cable (setting you back $80 to $150 a month, which limits your choices and means of viewing to a TV and an air date, unless you have DVR which usually costs $15-2o a month, add premium channels which again do not offer thousands of movies at your disposal at any time for unlimited viewing on nearly any device; let alone the fact that you probably only watch 15% of the available channels making it a colossal waste of money). If you believe the future of entertainment is in Blu-ray and DVD’s, you’re welcome to it. If you think that $8 (or even $16) is too much for streaming content to numerous devices is too expensive or doesn’t offer enough options — then you need to evaluate what you expect for what you pay (and read again your other options). Better service comes at a price and sadly in this country we expect far too much for far too little.