Netflix = Capitalism, and other related topics

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I’m sure you’ve all heard by now:  Netflix has restructured their rates, and a lot of people are up in arms on the way these changes will be affecting them.  Reportedly, over 10,000 posts (most negative) were made to Netflix’s Facebook page this Tuesday after the announcement of the restructuring of the plans, many of which carried some version of the message “I’m canceling.”

And why shouldn’t people be upset?  With unlimited streaming and unlimited DVDs (one at a time) only costing $9.99, a 60% rate hike for the same thing seems almost absurd.

Or does it?

People that have responded to the Netflix rate restructuring seem to fall under a few different camps, all of whom ignore some of the basic, logical facts.

First off, there are those that act like $15.99 is a lot of money.  Sure, a 60% “hike” in monthly charges is pretty drastic.  In light of the fact that $15.99 is less than the average American spends on coffee per week, though, it really shouldn’t be that big of a deal.  If an extra $6 is really going to break the bank, try a Diet Coke instead of that Starbucks Espresso just one day out of the month and the problem is solved.

Secondly, there are those that act like canceling their Netflix will save them money.  Will it?  Will it really?  I think we all know it won’t, unless those cancelers cease watching movies altogether.  A movie ticket at the theater runs about $11.50 (sometimes more, sometimes less).  A DVD or Blu-Ray Rental at Blockbuster runs around $5.99 or more.  A Video On Demand through Time Warner, Comcast, and other similar cable companies runs around $5.99, unless you chose a second rate/nobody wants to watch this movie from the $2.99 or less bin.  About the only way you can watch the same number of movies per month and save money would be to watch 15 or fewer $1 rentals from the Blockbuster Express or Redbox kiosks, but then you can watch no more than 15 movies (if you want to save money), can only keep the movies for one night, and are very likely to get one that is scratched and unplayable.

There’s also the simple fact that changing times mean inflated costs of doing business.  When a small business owner has to adapt to a changing economy, he raises his prices.  When there is a milk shortage, the cost of milk, yogurt, and cheese goes up.  When there is a natural disaster, gas prices sky-rocket.  The inability of Netflix’s millions of users to understand that business costs go up occasionally is astonishing.  Speculators have even suggested that this is the reason for Netflix’s hike in prices:  as the cost of securing online streaming contracts goes up, Netflix has to raise its rates.  Netflix has not officially commented on the reasons for restructuring, but it just makes sense.

Lastly, there is the entitlement camp.  These are the people that are irking me the most in this Netflix uproar:  the people that act as if they are entitled to unlimited movies, in the formats they want, with no change in prices at all, ever.  I have seen so many comments on Facebook, Twitter, LinkedIN, and in the news over the last two days from people complaining that Netflix had better make all movies available for instant streaming, or else.  Quite obviously these are the people for whom $6 extra per month would break the bank, so they expect the $7.99 instant streaming to include everything.  If this entitlement camp wants to act so entitled, rather than vent their expectations on Netflix, they should perhaps turn to the studio executives that are making things difficult for everyone in the first place.  LA Times reported Tuesday that studio executives are glad that Netflix is changing their rate structure, claiming that this means through user cancelations their own means of profit through Video On Demand and Blu-Ray Discs will again soar.  The Times further stated that “… four studios prevent the company from offering some newly released DVDs until 28 days after they go on sale in stores. Three others keep their films off the Netflix Instant streaming service until they finish airing on HBO — about seven years after their home video release…”

The moral of the story?  Hollywood is a greedy, disgusting industry.  The further moral of the story?  By taking advantage of capitalism, Netflix destroyed the video rental store industry – or, to put it nicer, it “restructured it,” but we only have ourselves to blame for feeding in to it, and thus creating higher costs for all our other options.  The end-all-be-all moral of the story?  If you don’t like what Netflix has done with their restructure, you certainly can cancel your subscription, but before you do so consider what it’s going to cost you.  And I’m not just talking about the money.  Canceling Netflix on principle, only to play into the hands of more expensive movie viewing options, will just mean less money in your wallet and a cadre of studio executives laughing all the way to the bank.

4 Replies to “Netflix = Capitalism, and other related topics”

  1. Yeah, people are very reaction prone these days–they see a “price increase” and don’t factor in anything else but that simple fact. There’s more going into it, and just because they raised their prices doesn’t mean I’m gonna go canceling my Netflix account. People these days in GENERAL, don’t understand the complicated causes and affect of things –more factors go into many of the things and decisions that occur day to day, whether it be by large companies, or the government, and most people look at the most simplistic viewpoints of such.

  2. I think there needs to be more information out about what the process is for instant streaming; also the blocks that are put in place by the studios. It is of no surprise that the studios make things difficult, although thinking that people upset about $15.99 a month will just run out and spend money on more expensive options which will benefit them might be a bit of a stretch (in some cases).

    I know that for myself, canceling Netflix would very likely equal even more reading. But I know a lot of people that this would most certainly NOT be the case for, especially people that are in love with the film industry. My husband is one of them. If he canceled our cable and the Netflix, he wouldn’t read more. He’d first watch all 400+ of his DVDs a couple times, then he’d start renting movies in stores or On Demand; and he’d use the lack of Netflix to justify adding more Blu-Ray to that 400+ collection. I think there are more people out there like him than you’d think too.

  3. If I may…
    “First off, there are those that act like $15.99 is a lot of money.” By itself, no, it’s not. Coupled with the price of everything going up, yes, it adds up. There is a tipping point for everything, a price beyond which the consumer just will not pay. I don’t think this is it for Netflix, but it may be close.

    “There are those that act like canceling their Netflix will save them money. Will it? Will it really?” I suspect yes. I canceled cable television a year ago and saved myself nearly $75 a month. It was replaced by considerably more reading by my entire family. If I cancel Netflix as well, it will probably be replaced by even more reading.

    “There’s also the simple fact that changing times mean inflated costs of doing business.” Except, Netflix’s business model hasn’t changed. This is not about securing more contracts – their business partnerships have not changed, they aren’t expanding their catalog, and I don’t see any of that changing with this price hike. The cost of delivery for streaming video is fairly fixed and with the cost of servers at historic lows, could actually drop with proper IT management – if it was priced right to begin with.

    And that’s where I think the crux of this price hike is. $9.99 for unlimited streaming was a stupid, unsustainable business model to begin with. Rather than admit up front that they couldn’t remain profitable and still offer the same level of service, they are lowering the price but keeping it broken in a way that makes it almost mandatory to purchase a more expensive service. Streaming has always been intentionally broken (want to watch Season 1 of “The L-Word”? Fine, but it’s only available on DVD. You can stream all the rest though…) By splitting out the two offerings for a higher price, they are almost guaranteed to get 100% conversion to the higher priced package from anyone who is familiar with their product. Those who aren’t familiar will upgrade quickly or drop it altogether.

  4. *applauds*

    Also, my apologies, but the only way I’ve ever been able to read a friend’s blog regularly was to have each post sent to my inbox, which they are now haha.

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