While Netflix announced 7/12 it is raising its prices by as much as 60% for subscribers who want to rent DVDs by mail and watch video on the Internet, some of its customers are balking. More than 8,000 comments posted negative commentary on the company’s blog before the forum maxed out. Currently, subscribers pay $9.99 per month for unlimited access to a library of movies and TV shows that can be viewed instantly over the Internet, plus one DVD at a time sent by mail. Starting 9/1, subscribers will be charged $15.98 per month to keep both the streaming and DVD-by-mail features. Or, they can choose one or the other for $7.99. For new subscribers, the rates take effect immediately.
Netflix claims the increase is needed to support the DVD-by-mail side of the business while allowing it to continue strengthening its streaming video offerings. “We went from being an ultra-extremely good value to an extremely good value,” Steve Swasey, Netflix VP/corporate communications, was quoted as saying. “It’s $6 [more] a month. It’s a latte.”
Netflix’s Facebook page had over 50,000 comments by late 7/13, many saying they had already canceled their accounts and were moving over to Amazon.com, Hulu or Redbox.
RBR-TVBR observation: While the company likely needed to make a price change to remain profitable (it’s likely the original prices were set to get the most users “hooked” anyway), this is a pretty substantial one and the company mishandled the way the price change was announced, letting social media take the reins of the story, rather than the PR folks. When the dust settles, though, there will likely not be many folks dropping the service. They’re used to it and may not want to go through the sign-up process at a competitor. As well, Netflix stock rose $7.46 the day of the news.
Other reasoning behind the increase is also likely due to content licensing. Analysts estimate the company will be paying the Starz premium cable channel as much as $300 million per year for programming–up from the original $20 to $30 million it was paying before it signed a contested renewal deal. Netflix also plans to spend $70 million for a planned expansion into Latin America and the Caribbean this fall.