Netflix Public Service Announcement

Netflix_medium

via www.sentientinsight.com

I am tired of all the anti-Netflix talk I have been hearing online ever since the price hike/restructuring. A lot of people seem to think Netflix just arbitrarily decided to raise the price because they are greedy. This is not the case and I will attempt to explain why. My hope is that this will help everyone have a better informed opinion on this issue.

Netflix does not own the content that you watch on it. This content is owned by various rights holders, mostly Movie and TV companies, and Netflix has paid them a license fee to stream it to you for a limited amount of time.

When Netflix first added streaming to their DVDs-By-Mail service it was a new untested business. No-one had ever tried charging to stream movies/TV over the internet in any large scale before. Because of this Netflix was able to make some pretty good deals with the content owners to stream their content because content owners did not expect this business to ever become big. This is part of the reason Netflix was able to keep it's price so low for so long. $9.99/month really was an incredible steal when you think about all the content you got access to.

Now jump ahead a few years to a few months ago. The streaming business had grown leaps and bounds for Netflix. So much so that they are betting the future of the company on it and they now view DVDs-By-Mail to be a legacy service that will eventually be phased out. The content owners saw this and as the deals that Netflix had with them started to expire they now demanded enormously large license fees for Netflix to continue to use their content, sometimes as much as 10x the original deal. Netflix did it's best to fight this price inflation but, they did end up having to give in somewhat and they are now paying a lot more just to maintain the content library they currently have. At the same time, Netflix is constantly trying to respond to consumer pressure to expand it's library by spending more money to license more content. Which of course now also costs more than it used to.

With all this, it was inevitable that Netflix would eventually have to raise the price of it's service to account for all these increased costs. And even when they did that, they split the DVDs-By-Mail and the instant streaming services into separate services so you could just subscribe to one or the other, or both. The new price is $7.99/month for each service. This was an attempt to minimize the affect the on consumers who predominately used one service or the other by allowing them to not increase their monthly bill by simply canceling the service they barely use. This is what I did. I always stream and I never get DVDs-By-Mail so I canceled the DVDs-By-Mail service and my bill is actually $2.00/month cheaper now. The only people who had their bill truly double were people who heavily used both services and wanted to keep both.

So, now that you are armed with all this new information, I hope you will realize that the new pricing structure is not unreasonable and If you are angry about the price hike you should complain to content owners like Disney, Fox, NBC, CBS, Paramount, Miramax, Starz, etc. Not Netflix. It is these content owners' greed that has forced Netflix to raise it's rates, not some executive at Netflix deciding he needs a bigger bonus.

On a personal note, I find all this uninformed anti-Netflix sentiment offensive, not only because it is ignorant, but because we should be applauding Netflix. Netflix is an American company and it is one of the last companies left that is actually trying to provide a good service at a reasonable price and is not just screwing over it's customers by trying to charge as much as they can for as little as they can, like most others. Netflix is now even investing in new original content and reviving cult classic TV shows that were cancelled like Arrested Development. All in an effort keep improving their service.

I hope this was informative.