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Dream a Little Stream

July 13, 2011

I heard on the way in today that NetFlix had hiked prices 60%.  My first thought: “Oh, they have to pay for that streaming service growth.”  Yep.

The streaming-plus-DVD plan has now been scotched entirely, and there are two separate plans available: unlimited streaming for $7.99 a month or the ability to get DVDs through the mail (still one at at a time) for $7.99 a month. Customers can purchase both of course, but there is no discount associated with doing so.

This is an interesting move.  You can talk all day about how this is a price drop for people who just want to get DVD’s by mail.  NetFlix is pretty much the big game in town on any video rental anymore, and they’ve been pushing the two-for-one incessently in their marketing.  The goal is to keep moving in a market where very large players live and die on catching the trend.  Go ask Blockbuster, or Hollywood Video.

Interesting commentary from Felix Salmon at Reuters, who points out that this undermines the company’s famous “long tail” strategy. At least, for anyone purchasing the streaming-only service.

For while streaming might be just the bees’ knees, it does suffer from the number of offerings being so much lower. In the long run, everything will be available purely online, but it just ain’t at present, and a significant percentage of Netflix’s business is in that long tail of movies which are only available on DVD.

Growing the streaming service is going to take a lot of capital.  So getting people to pay specifically for the service gives the company an idea of how fast to grow, and they can probably see how much revenue they can get, and therefore what to dedicate to it.  The idea seems pretty good on the surface.

That said, the growth of the streaming service is all going to be based on the actual content providers’ desire to stream the content online.  NetFlix is a distributor, and the content owner is the king of the hill in terms of what can be done with it.  If the movie or video owner can’t see a decent revenue stream as compared to exposure, then NetFlix can’t stream it.

I wonder if anyone else is out there to take advantage of a NetFlix stumble?

5 Comments leave one →
  1. July 14, 2011 8:25 am

    I think my comment went into spam b/c I had a link in it. Either that, or it disappeared into the ether, LOL.

    Check for me, wouldja?

  2. July 14, 2011 8:23 am

    I cancelled my netflix based on this change. I didn’t see it as a price hike. It’s more of a reduction in services for current price charged. The streaming selection is really pretty lame, but that insulting CEO was the deal breaker. Yep, I remembered his attitude about his customers:

    Think we won’t even notice the change, do you, jerk? I’m an Amazon Prime customer, and I don’t need you.

    • July 14, 2011 9:30 am

      Isn’t it amazing how a few bonehead comments can completely kill the customer base? I’ve seen my company learn that one a few times.

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