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. 

Lost: The End

As much confidence as we have in the story we’re telling, we are also comfortable saying, “But what do we know?” This is our best version of the story of Lost, and it’s the definitive one. The worst thing we could ever do is not end it, or go with some bullshitty ending like a snowglobe or a cut to black. That was genius on The Sopranos, but The Sopranos isn’t a mystery show. For us, we owe our best version of a resolution here.

— Damon Lindelof in Wired Magazine issue 18.05

I was a latecomer to Lost, having waited several years to start watching the first season on DVD. I continued watching the series with interest (but also with a lack of urgency) until a couple of weeks before the final season started in February. Then, determined to get caught-up, I embarked on a two-season, 31-episode, viewing marathon that allowed me to experience the closing chapter of Lost alongside millions of other viewers.

Needless to say, I love this show. With its mixture of fantasy, religion, philosophy, science fiction, action, and character-driven stories, it is unmatched by anything else on television – past or present. And unlike most other television series, the creators of Lost were able to fully tell – and end – the story they envisioned.

And that’s what I want to talk about here. Not the show’s flaws – there are plenty – but how producers Damon Lindelof and Carlton Cuse chose to end things. Or not end things, depending on your opinion.

Warning: Spoilers Below

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Teaching Kids Science With Sid the Science Kid

Photo of Sid from the PBS show Sid the Science Kid

Photo of Sid from the PBS show Sid the Science Kid

When I was growing up, one big investment my parents made for me and my siblings was a World Book Encyclopedia set, accompanied by a library of Childcraft topical books designed for kids. I remember spending countless hours reading about outer space, plants and animals, the geology of planet Earth, weather systems, and the Seven Wonders of the Ancient World, to name a few subjects. And the science experiments – I could never forget the science experiments. These books made a huge impact on me as a learner and deepened my curiosity of the world.

That’s why I’m so excited to cultivate a similar love for learning in our two boys. When Kael (3.5 years old) asks me a ton of  “how” or “why” questions, I’m delighted. I do my best to avoid pat answers, and on a number of occasions I’ve happily said “That’s a great question, Kael. I don’t know the answer, but let’s find out together.” This often leads to a trip to the laptop and a search on Google or YouTube, where we can hear what a fox sounds like or see what a dinosaur may have looked like.

So, I was thrilled after seeing a few episodes of  Jim Henson’s Sid the Science Kid on PBS. It’s science concepts for pre-schools, and it’s awesome.

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An Automated Macintosh Workflow for Getting New TV Episodes From the Internet to Your iPod

I’m a big fan of good TV1, but I’m not a fan of being stuck watching it on the TV. Don’t get me wrong – I’m happy we have a TiVo to entertain our boys with their favorite episodes of Little Einsteins and Thomas the Tank Engine on-demand, but there’s something to be said about being in control of when and where I can catch up on Fringe and Dollhouse.

This post lists the automated workflow I’m using on our iMac to get new episodes of my favorite shows off the internet and onto my iPod Nano so I can watch them whenever and wherever I want.

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Finally Getting into Lost

Lost Logo

I had very little interest in Lost when it made its debut back in 2004. I’ll admit that I knew nothing about it, other than it centered around people trapped on an island after a plane crash. It reminded me of Survivor) for some reason, and I didn’t expect it to be neither good or on the air for very long. Boy was I wrong.

After season one of Lost was done in 2005, I had heard enough to be curious. I didn’t feel like jumping immediately into season two would be enjoyable or do the show justice though, so I decided to wait. A year later, I received season one on DVD as a gift from Casey. Later that same year, I received season two. The biggest obstacle at that point was time. A new baby, a new job, and finishing a masters degree just didn’t leave time to start watching Lost. Because I knew that once I started it, I wouldn’t want to stop.

So finally, a couple of months ago, Casey and I started watching Lost season one together. It’s been extremely fun not only watching the story and mystery unfold, but to share it with my wife, who’s experiencing the show for the first time too. I love how we get to discover the island along with the characters, and how we get fed bits and pieces of their back stories to give them depth and complexity.

Lost has also made me eager for J. J. Abrams’ next television series, called Fringe, that will start this fall. You can be sure I’ll be watching this one from the beginning though!

Quick Look at the Hulu Beta

Hulu

Earlier this evening, I received my invitation to join the private beta for Hulu, the new video joint-venture between NBC Universal and News Corporation. I’ve played around with it for a few minutes, and here are my first impressions.

First, it’s obvious this isn’t intended on being a direct competitor to YouTube. There’s no way for users to upload their own content, though you can rate and review videos. The interface is clean and simple, making it really easy to browse content by popularity, network/studio, and more.

Most important, of course, is the content. Hulu has quite a bit of it, considering it’s currently a closed beta. I count 16 different networks/studios with videos, from the big ones (NBC and Fox) to E! and the SciFi channel. And while all the currently popular shows are available, including Heroes, The Office, Chuck, The Simpsons, 30 Rock, etc., there is quite a bit of older material too. You can now get your fix of The A-Team, Airwolf, or Doogie Howser, M.D., among lots of others.

Videos for the various shows are available in either full episodes, shorter clips, or both, depending on the type of content. Hulu even lets you embed videos into your site as you can with YouTube, which gives me a great excuse to share with you what may be one of the funniest scenes I’ve seen on TV in years. It’s from an episode of 30 Rock titled “Hard Ball“:

Is The Office Our Only Shared Television Experience?

I recently came to the realization that NBC’s The Office is the only television experience that I share with almost all of my friends and family. It’s the one and only show that everyone at our office watches, and that we can chat about the following morning. It’s also a reminder that the so-called “water cooler moment” is now a rarity.

Dunder Mifflin Paper Company

Prior to the internet, video games, TiVo, Netflix, podcasts, Youtube, and cable television, it was the norm to have TV shows that everyone watched and discussed the next day. Just 10 years ago we shared Seinfeld and Friends, but now our attention is fractured among an infinity number of entertainment options. For example, among my family and friends, I can only think of a handful of people who watch even one of my other favorite shows (Heroes, Chuck, 30 Rock, My Name is Earl, Scrubs, The Simpsons, and Pushing Daisies). There are just so many ways to be entertained that you can’t possibly keep up – even with the good stuff.

That’s why I feel The Office is so special. Somehow, it manages to transcend everything else competing for our attention to create a shared experience every Thursday evening. That’s pretty impressive, considering the current state of entertainment, and speaks volumes about the appeal of original, well written television.

My Favorite Simpsons Episodes

You may not know this about me, but I’m a huge fan of the Simpsons – have been ever since the beginning. In high school, I would frequently take in 1-2 hours of episodes every day, so I quickly became adept at spouting off obscure references and quotes from the show.

Last night I was finally able to take in the Simpsons Movie with a couple of friends, and it was everything I could have hoped for. The jokes came fast and often, and the story was great. The writers did an amazing job.

So, in honor of the awesome movie, I decided to give you my top ten Simpsons episodes of all time. With 400 episodes and counting, this was harder than you might expect. These my top picks from my list of about 50 amazing episodes. I hope you enjoy!

10. Homer at the Bat (Season Three)

Mr. Burns fills the power plant softball team with ringers from Major League Baseball in order to win a $1 million bet with a competitor. The recruiting scenes for each player, and their eventual mishaps that prevent them from playing in the big game, are great.

9. Sleeping With The Enemy (Season Sixteen)

The only episode on my list from the more recent seasons of the show (I think it peaked in season eight). Marge takes in Nelson Muntz after feeling that Bart and Lisa don’t appreciate her attention anymore. Bart’s “party” — classic.

8. Deep Space Homer (Season Five)

There’s so much to like in this one. Homer becomes an astronaut after TV ratings suffer for NASA and they decide to put an “average shmoe” into space. This episode also gave birth to the famous Kent Brockman quote, “I, for one, welcome our new insect overlords.”

7. The Itchy & Scratchy & Poochie Show (Season Eight)

The episode that marked the Simpsons as the longest running animated series on TV (surpassing the Flintstones), it was a commentary on the frequent decline of long-running shows. It featured the introduction and farewell of two new characters: Poochie in the Itchy and Scratchy cartoon, and Roy in the Simpsons’ household. The kids focus group and network staff meeting scenes are both hilarious.

6. Homer’s Enemy (Season Eight)

This one centers on Frank Grimes, a new worker at the power plant who eventually becomes Homer’s enemy. It’s probably the darkest episode in the series, but definitely a classic.

5. Team Homer (Season Seven)

Homer creates a bowling team with some friends (The Pin Pals) and gets sponsored by Mr. Burns, causing some problems later in the episode. At the same time, the kids are forced to wear uniforms at school after a MAD magazine incident.

4. Radioactive Man (Season Seven)

Springfield hosts the filming of the Radioactive Man movie, with Milhouse landing the role of Fallout Boy, the main character’s sidekick.

3. Itchy & Scratchy Land (Season Six)

The Simpson family visits the newly opened Itchy & Scratchy Land theme park for their family vacation. Lots of great Disney spoofs, plus the origin of my nickname I use on the Internet.

2. Bart on the Road (Season Seven)

Armed with a fake drivers license and some cash, Bart, Milhouse, Nelson, and Martin head out for a spring break road trip. Their destination: The Worlds Fair in Knoxville, Tennessee.

1. Lemon of Troy (Season Six)

Bart leads several other boys into Springfield’s rival town, Shelbyville, to recover their prized lemon tree that stolen. The interaction between the kids is great, and the dialog throughout the episode is top-notch.

So, there you go — my current top 10 list as of today. I’m interested to hear from you in the comments — what are your favorite Simpsons episodes?

Only in Japan

Ah, the Japanese. How can you not love them?

We need more of this over here in the States, and less Howie Mandel.

The Business of Innovation on CNBC

Last night I was flipping through channels on the TiVo, and happened to come across a show on CNBC called The Business of Innovation. It turns out we caught the third episode in a series of five, each of which will also be available to watch online.

Watching this program, I was actually pretty impressed at the message that came across. The show is co-hosted by Roger Schank, who really does seem to understand the mechanics of innovation. Last night, it was namely “don’t ask your customers what they want – watch them.”

Overall, this show is worth checking out, even if you’ve heard it all before. We can always use a reminder!