New Netflix Price Changes – 2011

Netflix recently announced new Membership plans and prices for everyone. As expected, Netflix blog readers are flocking in great numbers to complain about it. Netflix remains resilient about the changes, insisting that they’re for the greater good.

Whether that “greater good” is good for both the customers and the company, only the customers or only the company is at this point undecided in terms of a long-term strategy. In terms of the customer viewpoint, the move is seen as a breaking point for many to start finding alternatives or to cut back on either streaming plans or the DVD plan.

The old prices that were in effect until today were divided into 2 popular plans:

Plan 1: Unlimited Streaming and Unlimited 1 DVD out at-a-time, for $9.99 a month
Plan 2: Unlimited Streaming only, for $7.99 a month

They are becoming separate plans, however. Both Unlimited Streaming and Unlimited DVDs will become $7.99 each, costing you a total of $15.98 for Plan 1 from now on for new customers and from September 1st, 2011 for existing customers. Read on for reasons behind the price increases, and for details on the new prices and plans.

Reasons Netflix Increased Membership Prices

1. Streaming income alone is not enough at the moment for Netflix to bring out newest shows for Instant Watch users.

   This was clear back in June of this year when Netflix CEO Reed Hastings said at the D9 interview:

   Consumers want us to have all the new stuff. But it’s very expensive, and we can’t afford all the new stuff and offer the service for $8. So at $8, we’re a compliment to the new-release business. “The new-release business will stay as pay-per-view, because that’s a higher margin for the distributor.”
   

2. DVDs still make money.

   Movie studios are promoting it, and customers are still buying it. Netflix apparently has decided to stick with that option for as long as possible and with as much ROI [return on investment, or profit to be more precise] as possible.

3. TV and Film industry still gives Netflix headaches over streaming licenses.

   Netflix has to negotiate deals for all movies and TV shows. In contrast, DVDs come and go as agreed licenses. Netflix does not have to negotiate prices or anything for DVDs similar to what it has to do for Streaming customers. Hollywood keeps making Netflix negotiate more for streaming licenses. In addition to that, TV shows on DVDs are much cheaper to get and sell for Netflix, compared to Netflix having to actually pay for TV show streaming.

4. Around 40% of Netflix customers are still DVD only customers.

   Around 61% of Netflix customers stream something through the service as of June 2011. That means over 9 million customers are still DVD only customers. In Netflix’s logic, if 9 million customers can pay Netflix for a DVD only subscription, many others out of the 24+ million customers will be willing to pay extra for DVD service in addition to paying separately for a streaming service.

5. The competition in the online streaming is growing strong, so maintaining a stronger and more expensive DVD business is the logical choice for them.

   Amazon Prime and Hulu are striking at Netflix hard, with Hulu even snatching The Criterion Collection from Netflix in its entirely. Netflix knows the future is in streaming, but at this time, Netflix cannot simply give up the DVD business nor let it be cheap because it needs all the money it can get from every possible method to keep pumping into the streaming business. The fewer streaming movies Netflix has, the more it should offer via its DVD area or risk losing customer completely to Amazon Prime, Hulu or even Comcast Xfinity.

   Here is Netflix’s VP of Communications, Steve Swasey, talking about Netflix’s future, the competition and the future of movies and TV shows:

   Watch the full episode. See more Nightly Business Report.

6. Netflix DVD division, while being favored less than the streaming division, is still profitable and more popular when it comes to all the newest movies and TV shows.

   All latest movies and TV shows mostly come out on Netflix DVD before they come out on Netflix Instant Watch. This is outside of Netflix’s control, as it is related to #1 above: streaming licenses. That is why many customers prefer paying the current $9.99 for DVD plans instead of the current $7.99 for the streaming plan. Netflix is assuming that such customers will be willing to pay $7.99 fully and separately for the DVD plan in addition to the streaming plan.

7. Netflix wants to pump up the importance of the Streaming plan.

   Even though the current old pricing of $7.99 for streaming and $9.99 for DVD plus streaming reflects a focus on streaming, it actually showed the popularity of DVDs. In reality, no longer is the streaming option a $2 add-on. With this pricing. Netflix Instant Watch is a service of its own, just like the Netflix DVD option. If a DVD customer wants to move on to the Streaming plan, which is the future, they will also have to pay the full price instead of simply paying an add-on fee.

Full List of new Netflix Prices

Here are all the current new plans available to every customer, new or existing, available via the Netflix Subscription area:

Unlimited Streaming (no DVDs)

Unlimited Streaming : $7.99 a month.

Unlimited DVDs (no streaming)

1 DVD out at-a-time : $7.99 a month
2 DVD out at-a-time : $11.99 a month
3 DVD out at-a-time : $15.99 a month
4 DVD out at-a-time : $21.99 a month
5 DVD out at-a-time : $27.99 a month
6 DVD out at-a-time : $32.99 a month
7 DVD out at-a-time : $37.99 a month
8 DVD out at-a-time : $43.99 a month

Unlimited Streaming + DVDs

Unlimited Streaming + 1 DVD out at-a-time : $15.98 a month
Unlimited Streaming + 2 DVD out at-a-time : $19.98 a month
Unlimited Streaming + 3 DVD out at-a-time : $23.98 a month
Unlimited Streaming + 4 DVD out at-a-time : $29.98 a month
Unlimited Streaming + 5 DVD out at-a-time : $35.98 a month
Unlimited Streaming + 6 DVD out at-a-time : $40.98 a month
Unlimited Streaming + 7 DVD out at-a-time : $45.98 a month
Unlimited Streaming + 8 DVD out at-a-time : $51.98 a month

Limited Plans

1 DVD out at-a-time (limit 2 rentals a month) + 2 hours of Streaming : $4.99 a month

Starz Play Only (no DVDs) Unlimited Streaming : $6.99 a month

What do you think of the new Netflix prices?

What do you think of the new Netflix prices? Do you like them or hate them? Will you change your Netflix membership or continue it the way it is? Do the above reasons, in your view, justify the price changes?

Share your opinions, reasons of why this is good or bad or any questions in the comments below. Thanks!