Saturday, July 16, 2011

Netflix Plans Change

Anyone that is a Netflix subscriber, and those that aren't, have heard the news that the "Blockbuster killer" has changed the game again. Like many changes, this will benefit some and hurt others. Unfortunately for me, the way I use their service, I'm seeing a 60% increase in my monthly bill.

Now some of you will say the with Redbox and Blockbuster Express in the mix, we no longer need to get DVDs in the mail. For the most part I agree, but Netflix still has a better DVD library, especially for catching up on TV shows. Also, since I don't have HBO, I have to wait for DVD to see shows like Entourage, Boardwalk Empire, and Game of Thrones. HBO offers a great product but their monthly subscription rate is higher than even the new DVD subscription. I will admit, with the new HBO Go, I have been considering signing up for HBO since I can now watch shows on my iPhone, Stacie's iPad and our next TV.

One of my biggest problems with this deal is the overall DVD service from Netflix has changed quite a bit in the last couple of years. I feel with this rate increase on DVD service, they are double dipping with the savings they achieved by releasing new discs 28 days later than they used to do. They got quite a break from the studios when they made that move. Even with these savings, Netflix would rather not send out the physical discs. The shipping and inventory costs are increasing dramatically each year so it just makes sense to figure out how to get more subscribers at a lower cost per subscriber. With the ability to stream Netflix on so many devices, their customer base is increasing much faster without the need to increase their physical disc inventory. Admittedly, this was one of the reasons I initially bought my Blu-ray player and iPhone 4. I have not regretted the years of service I have enjoyed streaming shows from the SyFy and BBC America libraries. They are so committed to the streaming service that when Netflix is launched in Central and South America, it will be streaming only.

Netflix is not the only "villian" in this new strategy. Movie and TV studios must shoulder some of the scorn for the greed. They underestimated the deiree for the product and now want more for retransmission rights. Netflix had already signed a great deal with Starz but Starz and the studios have already stated that Netflix will not be getting the 'bargain' pricing went the contracts are renewed. It is estimated that the renewal rate could rise from $30 million this year to possible a couple of hundred million a year. That is just for one provider! This year we have already seen Netflix having to pull some movies from the instant streaming offering because "too many" people were taking advantage of the service and Sony siad it violated the agreement they had with Starz. Unfortunately for those of us that have cable / satellite service, this kind of thing is very common because of sports broadcasting. Whenever you hear athletes signing big contracts, we all will pay with higher cable rates because those costs are handed down to the end consumer. The owners / leagues start charging more the the right to carry games which in turn increases the costs to ESPN / Fox Sports, which gets charged the the cable / satellite providers and then eventually shows up in our monthly bills.

Who does this help beside just Netflix? People like my mother-in-law don't use the streaming service, so her bill actually went down $2 a month. Also, people that only do the streaming service will also see their bill go down by a couple of bucks. I think Redbox will see a good jump in their subscribership beginning next month and Amazon will probably see more people trying out their service just out of protest.

While I don't like the increase, it's still a great value compared to the old days of driving to the store and paying $4 a movie. With all of this in mind, I will continue to enjoy streaming on my devices and still get DVDs in the mail until the competitors offer the titles I'm looking to rent. I'm fully expecting the streaming service to be at $9.99 in a little over a year and probably be at $11.99 by the beginning of 2014 due to the higher and higher carriage rights that Netflix will be paying. I am also afraid that we also might be in a situation where the wired high speed provider start charging for data like the wireless providers currently do, but that's a post for another day.



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