The news that Netflix is once again raising their prices in September has been circulating the web, creating quite an angry stir from subscribers. While I like a low price as much as the next guy, I can’t hate on Netflix for moving forward with their company. Netflix has been working towards an online streaming model for quite some time, and this is just another step in that process. Their new monthly prices are roughly $8 for streaming only, $8 for 1 DVD at a time only, or $16 for both.
Netflix members are already watching more TV episodes and movies streamed instantly over the Internet than on DVDs, and we expect that trend to continue. Creating the best user experience that we can around watching instantly is how we’re spending the vast majority of our time and resources. Because of this, we are not creating any plans that are focused solely on DVDs by mail.
Last November when we launched our $7.99 unlimited streaming plan, DVDs by mail was treated as a $2 add on to our unlimited streaming plan. At the time, we didn’t anticipate offering DVD only plans. Since then we have realized that there is still a very large continuing demand for DVDs both from our existing members as well as non-members. [. . .] Reflecting our confidence that DVDs by mail is a long-term business for us, we are also establishing a separate and distinct management team solely focused on DVDs by mail.
Netflix realizes that the future is streaming content online, and is constantly transitioning in that direction. With the demise of Blockbuster, their main competitors are online (Hulu, Apple, Amazon, Google, etc.) With the price hike for DVDs-by-mail and unlimited streaming together, Netflix is seemingly encouraging their subscribers to consider switching to the streaming only option, while still maintaining their DVD option.
Both services are costly: Mailing costs, deals with the movie studios, and maintaining their servers.
With the new capital gained from the price increase, Netflix can focus on three important things:
- Making lucrative deals with the movie studios
- Bring more DVD features online (Language options, special features, commentary tracks)
- Creating original content
While I’m a huge fan of Netflix’s online content, DVDs are presently superior in picture quality and content, and the constant shuffling of titles available online is frustrating. My wife and I watched the first two seasons of Dexter online last year, and when we wanted to start season three last week, we discovered that Dexter was no longer available in Netflix’s online catalog.
Netflix still has a long way to go with their growing online catalog, and I’m hoping that there will be several improvements with their new income in 2012.
What do YOU think? Share your comments below.