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The movie streaming and rental site Netflix has recently raised its prices with up to 60% more than it currently costs. This means that 24 million subscriber will have to pay $15,98 a month instead of $9,99 dollars. The low pricing scheme has split into two separate plans: $7,99 for unlimited streaming (no DVDs) and $7.99 for unlimited DVDs, one disc at a time (no streaming).
The consequence, as many bloggers have pointed out, is that lot of Netflix users are pretty upset with this decision. Netflix users are not just angry at what they perceive to be the company’s unjust greed; they are stung that one of their favorite companies could ever do something like this, and without any warning at all. Some of the thousands of comments on Netflix’s Facebook page read: “Cancel your subscription, bring down the Netflix stock. Then they will listen to us!”, “They’re getting the same services they got before, but now Netflix is charging much more money for them”, and “Dear Netflix your price increase is a slap in the face in such a horrid economy. I’m cancelling my subscription as we speak.”
In addition, Tony Wible, an analyst with Janney Capital Markets, estimated that 80% of Netflix’s U.S. subscribers currently use a DVD/streaming combination plan and will be affected by the price hike.
Despite the negative consumer reactions, according to PCWorld.com users won´t have better alternatives than Netflix. After making a comparison among the main online rental or streaming services on the market such as; Blockbuster, HuluPlus, Redbox, and Amazon Prime, the online media stated that Netflix prices are cheaper than many of the alternatives while they offer more selection.
Netflix advertised the change as a new choice for consumers. For Netflix, the adjustment is “the latest step in a long-term transition toward becoming a next-generation premium television business,” said Arash Amel, a research director for IHS Screen Digest, noting that the company has made streaming, not DVDs by mail, the core of its business.
Mr. Amel also said further changes to Netflix’s monthly prices should be expected in the next couple of years as the company’s growth rate slows and as it pays hundreds of millions of dollars more to license streams of movies and TV shows.
Some experts think that one reason for the price hike is that Netflix has to buy its content from Hollywood studios who demand a higher price for streaming rights. In June, Netflix stopped streaming Sony movies through its relationship with Starz because of a “temporary contract issue between Sony and Starz.” The issue has not yet been resolved.
However, Netflix swears that higher costs of doing business have nothing to do with the price hike. Netflix´s blog offers this instead: “Why the changes? Last November, when we launched our $7.99 unlimited streaming plan, DVDs by mail was treated as a $2 add on to our unlimited streaming plan. At the time, we didn’t anticipate offering DVD only plans. Since then we have realized that there is still a very large continuing demand for DVDs both from our existing members as well as non-members. Given the long life we think DVDs by mail will have, treating DVDs as a $2 add on to our unlimited streaming plan neither makes great financial sense nor satisfies people who just want DVDs. Creating an unlimited DVDs by mail plan (no streaming) at our lowest price ever, $7.99, does make sense and will ensure a long life for our DVDs by mail offering.”
Will this affect the future of the company? A Netflix spokesman said executives would elaborate on the reasons for the price change when reporting the company’s financial results on July 25. However, those results will not be able to give a realistic picture of how Netflix will do financially in the coming year because, unlike new customers, the current Netflix users will not experience the new prices before September.
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