Netflix Price Changes

  • Posted: 13 July 2011 02:26 AM

    We received the following notice today:

    “Your current $14.99 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, 2 out at-a-time (no streaming) for $11.99 a month

    Your price for getting both of these plans will be $19.98 a month ($7.99 + $11.99). 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.”

    How might these price changes impact domestic revenue and earnings growth? Content providers want royalties on each stream versus the model of buy one CD and rent it limitless times at no additional cost.

         
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    Posted: 13 July 2011 02:49 AM #1

    How many would choose just 1 ?

    A revenue change was inevitable, either to satisfy investors or Big Hollywood.

         
  • Posted: 13 July 2011 01:02 PM #2

    Netflix’s streaming library is a fraction of their DVD titles. I’ve never used the streaming capability, mostly due to ATT’s DSL dismal performance in my neighbor. By the time their signal makes it to my router and then to my TV any content is unwatchable. Even YouTube videos right on my computer often don’t play smoothly. ATT claims fiber optic cable is needed in my neighborhood, but they have no plans to install it. They expect me to move in order to get better internet/TV reception.

         
  • Posted: 13 July 2011 01:13 PM #3

    I will probably stop using the DVD in the mail portion.  I hope that they vastly improve the streaming library with the added revenue.  I would pay the whole ~$20 a month for just streaming of the whole library, but that seems a bit high when you have to wait for the DVDs to come in the mail.

         
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    Posted: 13 July 2011 01:20 PM #4

    The streaming library has gone downhill (IMO).

    We’re canceling our Netflix and going Apple only.

         
  • Posted: 13 July 2011 02:20 PM #5

    Worth mentioning - if you are having “horrible streaming issues” with Netflix make sure you’re not using Google DNS. If you are using Google’s DNS then all calls to Netflix go to the same Akamai server. The same issue may occur with open DNS too. When it does this it basically breaks what Akamai was set up to do.

    So it’s worth trying you own ISP’s DNS servers and see if it fixes the probley.

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  • Posted: 13 July 2011 02:24 PM #6

    I cut my Bluray plan today. I imagine quite a few people will cut one or the other or leave Netflix entirely. IMO Netflix loses a lot of their competitive edge by basically forcing customers to choose one or the other. If customers choose to do both, there should be some kind of bundling discount.

    These changes don’t go into effect until September, but I think we will see Netflix’s revenue drop or stay completely flat QoQ. The opportunity to short Netflix may be coming sooner than we imagined. It’s only a matter of time until more and more cable operators implement monthly data caps further diminishing the value proposition of Netflix. Netflix is growing much slower than they thought they would in Canada due to data caps.

    [ Edited: 13 July 2011 02:29 PM by cdodge ]

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    Posted: 13 July 2011 03:09 PM #7

    I’m very amused that investors think a rate hike of that magnitude is automatically a good thing.

    If I had some extra spare change, I would look into buying puts on NFLX…someday.

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  • Posted: 13 July 2011 06:33 PM #8

    I think Netflix will be fine (although they’re probably highly overrated as a stock.

    But I want to take this opportunity to remind everyone that companies like Netflix and Hulu are mere content distribution companies. Without the content - which they have zero control over - they are nothing.

    One of the stories that came out regarding the price increase was that Stars had given much of their content to Netflix at very reasonable rates, treating them as a dumping ground. Much to their surprise, Netflix had almost or more views of Starts movies than did Stars itself. As a result, when the newest contracts were negotiated, the price of Stars properties when up from 10 to 20 times.

    This is the problem with these types of businesses. The are 100% dependent upon content and they have no leverage over the content creators. I have no idea where this specific market segment is headed, but I feel very certain that wherever they end up, the ride will be very, very bumpy.

         
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    Posted: 13 July 2011 07:58 PM #9

    Before streaming, I had the 4-5 DVDs-at-a-time plan.  Worth every penny to me.  NFLX will be fine.  Even if it’s a bubble, bubbles can float a great distance before they pop; and Reed Hastings is no dummy.  I’m sure they know their customer base and did their homework on the price elasticity of demand before the rate change.

    [ Edited: 13 July 2011 08:02 PM by lovemyipad ]      
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    Posted: 13 July 2011 08:17 PM #10

    I went streaming only.  Yes, the content is less, but I mainly watch old and foreign movies, which they have.  Newer ones I buy on iTunes and stream them from my computer via AppleTV

         
  • Posted: 14 July 2011 06:34 AM #11

    I already have/had NetFlix and only use the streaming option.

    Most current subscribers I’ve talked to have said they would dump the mail portion and just stream in response to the rate hike.

    One said he’ll probably leave NetFlix entirely, in protest, and buy Amazon Prime instead.

         
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    Posted: 14 July 2011 06:52 AM #12

    Mav - 13 July 2011 06:09 PM

    I’m very amused that investors think a rate hike of that magnitude is automatically a good thing.

    If I had some extra spare change, I would look into buying puts on NFLX…someday.

    Just did, NOW.]

    September 270’s PUTS

    They are insane. Raising prices 60% is a “good thing?”

    Retention rates are going to plummet, methinks they will bail on this option within six weeks, but the next qtr will be brutal.

    For those that don’t know about it, ZEDIVA.com gives you the most current steaming for $1.50 per title, you will have to go on a waiting list, as this company literally cannot keep up with the demand. This agressive move by NFLX will only shore up and accelerate their massive growth.

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    Posted: 14 July 2011 10:41 AM #13

    Netflix Poll Results: 41% Say They’re Canceling

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  • Posted: 14 July 2011 10:49 AM #14

    incorrigible - 14 July 2011 01:41 PM

    Netflix Poll Results: 41% Say They’re Canceling

    But the question is how many of them are actually Netflix customers? BI is so full of trolls that some will just be pressing buttons.

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    Posted: 14 July 2011 12:32 PM #15

    Blockbuster Video recently reopened in our neighborhood, as well as in an adjacent neighborhood. We have gone back to renting videos from them.

    We are also getting videos from the City Library. Not so much for “blockbusters” but for the more esoteric and classic stuff that can be hard to find elsewhere.

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