Netflix plans to eliminate its current $9.99 DVD and Internet combo package and split its subscription plans into separate services that charge subscribers $7.99/month each for unlimited online video streaming or DVD rentals. Changes are effective immediately for new members, and will apply starting in September for existing users. Despite lowering prices on standard DVD rental plans though, fans have reacted with outrage to the announcement.
Previously a market leader in DVD by mail delivery solutions, popular demand for online streaming movie and television viewing services prompted Netflix to launch a $7.99 streaming-only plan last November. Available as a free app on many devices from smartphones to Blu-ray players, tablet PCs and video game consoles, the service quickly became a token download or built-in feature. But despite slashing postage expenses, streaming video delivery has also led to heightened licensing fees for the company, which analysts say could cost Netflix as much as $700 million in streaming rights this year and $1.2 billion next. Between growing licensing costs and increasing competition from rivals such as Amazon Prime, Hulu and Vudu, more price hikes may be in store for shoppers down the road.
“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,” Netflix marketing VP Jessie Becker explains on the company’s official blog. “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. Given the long life we think DVDs by mail will have, treating DVDs as a $2 add on to our unlimited streaming plan neither makes great financial sense nor satisfies people who just want DVDs. Creating an unlimited DVDs by mail plan (no streaming) at our lowest price ever, $7.99, does make sense and will ensure a long life for our DVDs by mail offering.”
But despite such arguments, Netflix users have been less than enthusiastic about these changes, given the company’s smaller catalogue of digital online releases, a pale shadow of what’s available on DVD. Despite decreasing the price of its DVD-only plan by $2 a month, users interested in enjoying unlimited films and TV shows both online and via mail are clearly chafed at now having to pay a 63% premium.
“The only way that this is terrific for the customer is if you plan to offer your entire collection available for streaming,” commenter Scotty Fagaly responded on Netflix’s website. “Otherwise this is just yet another way to choke more change out of your customers.”
Fellow user Travis McClain also posed a pointed question. “DVD renters can pay more to access more of the voluminous DVD library, but what are streamers supposed to do about the lack of current releases or desired catalog titles? This is a disparity that really should be acknowledged in the price scheme.”
Pressured from all sides including Hollywood studios, everyday shoppers and Internet service providers, troubled by Netflix’s increasing bandwidth consumption, issues may represent the first signs of cracks forming in the company’s video empire. While it’s yet to be seen whether current dissatisfaction with new pricing schemes will lead viewers to abandon the service en masse, or force the company to reconsider its position, public response is presently deafening.
“I’ve been a subscriber for more than a decade, but it’s no longer worth with it with the limited streaming catalog,” says user Beth Case. “There are many competitors… I think Netflix is about to lose their spot as the leader in this field.”