Friday, July 15, 2011

Even watching movies is not EZ. More on NetFlix

Probably the best analysis I've seen to date, found at:

"The company isn't giving old subscribers preferential treatment. If you do nothing, NFLX is automatically increasing your price to $15.98 from $9.99. This might be why an informal internet poll reported yesterday that 40% of surveyed Netflix customers plan to cancel their subscription.

Reading the tea leaves here, this was a highly calculated move and we see three motives:

  1. The change captures a quick buck from the "slow and stupid" subs who don't track credit cards for a while and don't notice the 60% increase in price. Should yield a nice boost in cash flow to fund content deals.
  2. By breaking apart streaming and physical delivery plans, Netflix is able to increase price on streaming as content costs rise. The move shelters DVD-only customers from these price increases. The new structure is cleaner and paves the way to future price increases and tiering (more on that later).
  3. NFLX was obviously blindsided by the Sony (SNE) / Starz issue which was triggered by crossing 20m streaming subs. By breaking the two apart, it will fall below the 20m subscriber mark and temporarily regain the Sony content and thus increase its negotiating leverage with Sony.

Obviously, the huge risk for NFLX is that a meaningful block of streaming subs may cancel the streaming service (in favor of physical-only or cancel altogether). Given the fixed cost nature of the streaming content deals, this would be disastrous. "

Still: Every analysis that I've seen to date talks about "heavy" users of the streaming service and or "heavy" users of the DVD services and tries to divine what they may do. The analysts are ALL missing the "light" user of both -- the hybrid bundle subscriber that watches 2 or 3 DVDs and 2 or 3 streams per month (me, for instance.) The service and it's convenience were a great value to me at the prior price, but clearly NOT worth $15.98 per month. The analysis above even points out that providing to me the level of service I was paying for essentially cost NF nothing for which they had a sure revenue stream, yet they have chosen to give that up. I don't see how that can be good for business.

I'm sorry, NetFlix, but I won't be one of your "slow and stupid" subscribers.

Thursday, July 14, 2011

Dear NetFlix: Thanks for the customers. Signed, RedBox

NetFlix announced on their (free) Google Blogger weblog their new pricing plans. Prior to their announcement they had over 23 million subscribers. I wonder: How many they will have by the end of September? Their new plan nearly doubles the monthly cost for the same service I've been getting (1 dvd at a time and unlimited streaming.) If I watched a LOT of NetFlix (or any other video) $15.98 for that service may seem like a great deal. The reality is that we have a life outside video and generally only watch about 1 DVD per month and perhaps 1 streamed movie (VERY LIMITED CATALOG on NetFlix) and 1 or 2 NetFlix TV streams--maybe six hours of content total. That is NOT worth $15.98 per month. At that rate, Dish Network would cost me up to $1,917.60 per month vs. the $44.00 that I pay them for unlimited viewing. If your landlord raised your rent 60% with no increase in benefit -- or if gas went overnight to $5.60 a gallon would you still see it as a good deal? Everything is worth what people are willing to pay for it. I'm not willing to pay NetFlix $2.66 per hour for their service. I didn't even wait until the end of August (new pricing applies 1 September). I cancelled immediately. I can get what I want from HuLu or Apple TV.