With its entrenched market monopoly, DVD-by-mail and Web-streaming service Netflix has decided to reward its customers—with a wicked 60% price hike.
The company's previous $7.99 plan would get you one DVD at a time and unlimited streaming. That is now being split, so that a physical DVD plan is $7.99 and Web streaming is $7.99, for a total of $15.98. It amounts to an additional $120 a year.
Tuesday's smooth move is creating a drama of major proportions, with 33,000+ subscribers telling Netflix where it can stick its DVDs on the company's Facebook page. Another 6,000 have stormed the Netflix blog, while #DearNetflix at Twitter is also aflutter with promises of "a mass exodus." Among the common complaints is that the service's streaming choices are lame, void of many current and new releases.
Many are seeing red—as in Redbox, the popular $1 rental service available at thousands of grocery stores and other retailers. Others say they'll drop Netflix for Hulu, Amazon Prime, illegal Torrents downloads... and old-fashioned cable TV (my primary choice). Meanwhile, another innovation on the horizon is MoviePass, which lets you watch as many movies in theaters as you can muster for $50 a month by showing your smartphone. Very clever. It's beta testing in San Francisco. There's also... books!
To be fair, Netflix's price increase likely has to do with movie studios sticking it to the company to pay for streamed content, amid increased competition from Google, Amazon, Hulu and the like.
Netflix's licensing costs will rise from $180 million in 2010 to $1.98 billion in 2012. When the model was new, Netflix was able to secure contents right from Warner Bros. and MTV for $5 million to $10 million a year. No more.
Netflix has more than 23 million subscribers. Or at least it did on Monday. In addition to many colorful comments, some deemed the price hike "corporate suicide."