How Netflix Angered Most of its Customers in a Single Day

Earlier today, Netflix published a post to its blog that said, in some of the thickest PR bullshit I’ve ever read, it was raising prices splitting its streaming video plan from its DVD plans, resulting in a 60% price hike for most of its customers:

First, we are launching new DVD only plans. These plans offer our lowest prices ever for unlimited DVDs – only $7.99 a month for our 1 DVD out at-a-time plan and $11.99 a month for our 2 DVDs out at-a-time plan. By offering our lowest prices ever, we hope to provide great value to our current and future DVDs by mail members. New members can sign up for these plans by going to DVD.netflix.com.

Second, we are separating unlimited DVDs by mail and unlimited streaming into separate plans to better reflect the costs of each and to give our members a choice: a streaming only plan, a DVD only plan or the option to subscribe to both. With this change, we will no longer offer a plan that includes both unlimited streaming and DVDs by mail.

You see: This is about “offering our lowest prices ever” and giving “our members a choice“. It’s win-win. Except that our plan (unlimited streaming and one DVD out at-a-time) which used to cost $9.99 a month will be $15.98 starting in September ($7.99 each for the streaming and DVD plans).

Why the huge price increase?

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. Reflecting our confidence that DVDs by mail is a long-term business for us, we are also establishing a separate and distinct management team solely focused on DVDs by mail, led by Andy Rendich, our Chief Service and Operations Officer and an 11 year veteran of Netflix.

The reason why there’s still tons of demand for DVDs by mail is that, as good as Netflix streaming is compared to its competition, its selection is dwarfed by the number of titles in the company’s disc catalog. The best recent numbers I could find put streaming titles at about 20,000 and DVD titles at over 100,000.

Prior to the streaming-only plan offered late last year, you paid for the right to rent DVDs through the mail and members got internet streaming as a free add-on. It seems that pricing was more honest – DVDs are where you find the newest releases1 and a deep catalog of TV shows and classic movies. With its much smaller selection, streaming was a still a novelty.

However, it’s in Netflix’s best interests to get as many people onto its streaming plan as possible. From estimates I found online2, it costs Netflix about $1 to send a DVD to a customer when you factor in postage, handling, infrastructure, the cost of the disc itself, etc. On the other hand, it costs them 3 cents to stream a standard definition movie and 5 cents to stream it in HD.

As you can see, the profit margin on video streaming is clearly must higher than it was with the company’s old business model. One way to accelerate the trend toward streaming is to do exactly what Netflix announced today – jack up the price on the DVD plans so they’re unattractive to customers and hope they stay with the streaming-only plan. Then, continue to increase prices on the DVD plans every year until they’re so high, no one subscribes to them anymore and Netflix can happily close its warehouses and announce its service is available exclusively through streaming.

I have no doubt they want to get there as soon as possible, but in the mean time, it sucks to be a customer. We do watch most of our Netflix videos on our Roku box, but the streaming selection is still not that great. You need DVDs if you want to see new releases or if you want to work your way through HBO series’ like The Wire. The copyright holders don’t seem to be interested in making those things available on streaming, and it’s hard to say if they ever will.

The thing is, we don’t even get many DVDs through Netflix, so I don’t even care that much about the “Unlimited” aspect of the plan3. But to remove the option to get a few movies a month and then charge a lot more money for it – well, it sucks. Maybe they could grandfather us longtime subscribers on the two discs a month plan instead – I’d be satisfied.

Addendum: Peter Kafka over at All Things D had an article on Wednesday that backs up my theory on Netflix’s motivation for this price increase:

Reed Hastings’ company [Netflix] says it’s a cost issue. If people are going to use both his DVD-by-mail service and his Web video streaming service, he’ll need more money to support both businesses. That’s probably true.

Here’s what’s more true: Reed Hastings doesn’t want most of his customers to pay more. He wants them to pay less, and drop DVDs in favor of a streaming-only service.

To recap: Yesterday, Hastings kept the price of his streaming-only video service at $8 a month. But he raised the price of his companion DVD-by-mail service from $2 a month to $8 month, which will push many subscribers’ monthly fees from $10 a month to $16 a month.

Unless they stop using DVDs. Which seems to be what Netflix wants. Even though they haven’t said so out loud, to date.


  1. There’s currently a 28 day delay before most new DVD releases are available on Netflix. 
  2. I’ll see if I can dig up the source for this. 
  3. Unlimited DVDs on the 1 out at-a-time plan works out to, at most, eight discs a month. 

An Ode to Scott Pilgrim vs. the World

I’d been dying to see Scott Pilgrim vs. the World since I saw the first trailer for it last March. I didn’t get to see it in the theaters this summer, but I last week I finally got to sit down and watch it on Amazon streaming. Since then, I’ve watched it at least 2-3 more times.

In short, I love this movie. It’s fantastic – one of the most unique movies I’ve ever experienced and one of my favorite films of recent memory. And while I can see why it wasn’t a mainstream hit, it’s a travesty that crap like Little Fockers earn three times more than it at the box office.

Scott Pilgrim vs. the World movie poster

[Read more…]

An Agent of Chaos

Heath Ledger as The Joker
I had the chance to see The Dark Knight last night with a friend, and I think I can sum up the movie in two words: Mind Blowing.

I loved Batman Begins when I first saw it nearly three years ago, and I the sequel is even better. Director Christopher Nolan has created a masterpiece here – a movie as good as most crime thrillers and better than any comic book movie I’ve seen (note: I haven’t seen Iron Man yet). It’s dark, real, and intense, and makes the 90’s Batman movies seem as campy as the 1960’s TV series. I wish I could forget I ever saw them (George Clooney as Bruce Wayne? Are you kidding me?).

While countless others have said it before me, I’ll say it anyway – Heath Ledger is brilliant as the Joker. He disappears in the role, and you simply forget who’s playing this evil, insane genius. A self described anarchist, the Joker appears to have no agenda other than to create chaos. He seems to thrive on putting people into situations that force others to make extremely difficult ethical choices, including a version of the prisoner’s dilemma like you’ve never seen before.

It’s sad knowing that we’ll never get to see Ledger put on the Joker makeup again, but I can’t wait to see what Nolan has in store for the next chapter of Batman.

Bonus Articles

  1. Dark Knight Director Shuns Digital Effects For the Real Thing (Wired Magazine)
  2. Dark Knight Shift: Why Batman Could Exist—But Not for Long (Scientific American)
  3. The Dark Knight and Game Theory (The Quantitative Peace)

Movies Remixed?

Well known in the music scene, DJ Spooky has recently moved beyond just remixing music. He recently released a remix of the supposed 1915 film masterpiece “Birth of a Nation“, which depicts the confederates as heros and is apparently one of the most racist movies of all time. I’ve never seen the movie myself (and actually hadn’t even heard of it until today) and completely disagree with the advancement of racist ideas. That is why I was really interested to find out that DJ Spooky, himself an African American, had created a remixed version of the film, which he calls Rebirth of a Nation. The original film is in the public domain, so anyone is free to use the footage as they see fit, which is what Spooky did:

By remixing the film along the lines of dj culture, I hoped to create a counter-narrative, one where the story implodes on itself, one where new stories arise out the ashes of that explosion.

The end result is very, very cool. I can’t do it justice trying to describe it, so you can (and should) view a short 15 minute excerpt of Rebirth of a Nation at the DJ Spooky website.

Spider-Man 2

I was meaning to write about Spider-Man 2 after seeing it during its opening week, but am just now getting around to it. Bottomline: it’s an awesome movie and is well worth seeing in a theater. The filmmakers, led by director Sam Raimi, tell a compelling story, one which would make a good movie even without the super hero angle. While the first movie spent a great deal of time telling the story of the origins of Spider-Man, this sequel shows the burden of being a super hero. Peter Parker, Spider-Man’s alter ego, is trying to live as normal a life as possible. He lives in a crappy apartment where he doesn’t have his own bathroom and where the Russian landlord is constantly hunting him down for his rent money. He can’t keep a job as a photographer for the Daily Bugle or as a pizza delivery boy. He’s going to college, but his papers are always late and his grades are suffering. Finally, his relationships are falling apart as well: Peter’s relationship with Mary Jane is as rocky as ever, and Harry Osborn, his best friend, can’t stand the fact that Peter knows Spider-Man, whom he blames for his father’s death (see the first Spider-Man movie for the full story). All in all, life as a super hero is not as good as it sounds.

I won’t go into too much more detail other than that. But I’ll say this: everything – the character development, the crazed villain on a personal mission, the romance between Peter and Mary Jane, is told very well. Spider-Man 2 is the best movie I have seen in a long time, and definitely the best super hero movie I have ever seen. That’s right – as good as the first Spider-Man was, number 2 is better. I liked the X-Men movies, but they lack the realism and character depth of the Spidy movies. Batman? Good with Michael Keaton, but all downhill from there (don’t even get me started on Batman and Robin).

It’s been a long time since I’ve picked up a comic book, but Spider-Man may compel me to give them another look. I grew up reading the Teenage Mutant Ninja Turtles, with the occasional Superman and Batman thrown in. I honestly don’t remember reading any Marvel comics like Spider-Man, X-Men, The Incredible Hulk, etc. I have been looking on Amazon though, and they sell several volumes of The Essential Spider-Man, which reprint the first years of the Spider-Man comic as compilations. These are definitely on my reading list!

Welcome to 2004!

Happy New Year everyone, may 2004 bring success and happiness to you. Thankfully, New Years Eve came and went without a major terrorist attack anywhere in the world. While I’m sure the U.S.A. isn’t out of the woods yet, the various government agencies seem to doing a good job of working together in obtaining and analyzing the massive amounts of intelligence information out there. In addition, the longer we can keep luring terrorists into Iraq to fight our professional military, the better: Our troops are much more prepared and better equipped to fight the jihadists than we are on American streets.

Casey and I had a low-key, but fun New Years Eve. We first had dinner with friends at the Green Mill and later watched Hitchcock’s Psycho for the first time. I had, of course, seen the infamous shower scene before, but seeing the whole movie was well worth it. Hitchcock is an excellent story teller, using the black and white film and strings only soundtrack to great effect. One thing that suprised me was how early in the movie the female lead was killed off. Most modern thriller movies wouldn’t have the guts to do something like that.

I finally got to see The Lord of the Rings: The Return of the King Tuesday night. It was an amazing finish to an amazing trilogy. Compared to the other major trilogy finale of the year, RotK really delivered a solid and satisfying conclusion. Now if I can only find time to finishing reading the books!