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Netflix: We Thought You Would Be More Upset About The Price Hike

Reed Hastings expected even more outrage

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Netflix: We Thought You Would Be More Upset About The Price Hike
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The public reaction to the recent Netflix price change has calmed a bit, and although the interwebs are far from tranquil, we aren’t seeing the level of pure blinding rage directed at the company now that the announcement has had time to sink in.

If you’ve been living under a rock for the past couple of weeks, a rock that is not located on the internet landscape, here’s a brief recap of the Netflix hullabaloo:

The company announced earlier this month that they were doing away with the unlimited streaming / DVD combo plan in favor of separate plans for streaming and DVDs. Each will cost $7.99. Users that were paying $9.99 for unlimited streaming and 1-DVD-at-a-time rental will now pay $15.98 for the same service.

It should come as no surprise that people were a bit incensed after hearing this news.

But according to Netflix CEO Reed Hastings, people weren’t as pissed off as he thought they would be.

During Netflix’s earning call yesterday, Hastings had this to say about the backlash from the price hike –

Believe it or not, the noise level was actually less than we expected, given a 60 percent price increase for some subscribers. We knew what we were getting into, we tried to be as straightforward as we could, and that has worked out very well for us.

So Hastings knows that it was a huge change. That fact isn’t lost on him. But he seems to think that they can weather the storm. Maybe so – Netflix has a loyal following. But how loyal? Could people possibly jump ship to Redbox, cable providers or Blockbuster? A recent report shows a plunging brand perception following the price hike. Should they be worried?

To this writer, it seems as though Hastings knows that the price change was necessary in order to achieve a long-term goal: to phase out physical DVDs altogether. Here’s some more from the earnings report, where they discuss declining DVD interest and their focus on streaming –

We’ve spoken frequently of how we are directing savings generated from declining DVD demand into additional streaming content and marketing. During the quarter, we substantially increased sequential spending on streaming content as titles from our new content deals (discussed below) became available for streaming. At the same time, though, we maintained a disciplined approach to what content we license and at what price, spending somewhat less on streaming content than we budgeted for in the quarter. Also, DVD shipments came in even lower than forecasted, in part due to the popularity of our streaming only plan.

I plan to deal with the Netflix price change by dropping my DVD plan entirely and going streaming only. Netflix doesn’t even get most new releases until a month after they come out anyways. Any DVDs i need I can grab from Redbox. I’m sure many others share my decision.

Streaming is the future. Do you agree? Let us know in the comments.

Netflix: We Thought You Would Be More Upset About The Price Hike
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  • http://www.seo-theory.com/ Michael Martinez

    Ironically, TIME recently included Netflix in a “10 Things That Are Actually Getting Cheaper” gallery (from July 24). They note that “For the most part, Netflix customers are outraged at the company’s recent pricing changes. But while members of the popular combo plan are facing price hikes of $6 a month, subscribers who want the one-DVD-at-a-time service will wind up saving $2 a month with an option at $7.99—down from $9.99.”

    Read more: http://moneyland.time.com/2011/07/25/10-things-that-are-actually-getting-cheaper/#ixzz1TEZmtpzy

  • http://www.visin.com Tom Townsend

    “But according to Netflix CEO Reed Hastings, people weren’t as pissed off as he thought they would be.”

    Ya know he has no clue. Wait until August 31st when the Net heats up again at the countdown finality and September 1st Cancellation’s… What a dunce. Share holders of Netflix should ask for his head on platter after when the losses become REAL.

  • http://www.jayallenwrites.com/ Jay Andrew Allen

    I agree with Hastings. They’re playing a long game. They need to decrease costs and increase revenues in order to bring more streaming content to the table. HBO, e.g., has been resolute in keeping its content off of Netflix until the company can pony up more dosh.

    I think their success depends exactly on how much new streaming content they can bring to the table, and how quickly. Personally, there’s no way I’m dropping my physical DVD plan until Netflix’s streaming options improve. There’s only so much DOCTOR WHO one guy can watch…

    • http://www.ientry.com/ Josh Wolford

      True. As of right now, their streaming catalog is still underwhelming. But that should change in the coming months.

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