Netflix Angers, Loses Customers

Will it make a difference?

Netflix sent an email out to current customers announcing a change in terms of service that would also change plan pricing and introduce a new “streaming only” plan. Netflix’s blog, however, intimated the price changes were actually a reduction in price when compared to current plans.

The video giant’s blog read, “These plans offer our lowest prices ever for unlimited DVDs ‘” only $7.99 a month or our 1 DVD out at-a-time plan and $11.99 a month for our 2 DVDs out at-a-time plan.”

But customers weren’t fooled.

With the previous Netflix DVD plans, the unlimited streaming was provided at no additional charge, or the DVDs were provided with the unlimited streaming plan with an additional $2 charge. With the new plans, if Netflix customers want to get physical DVDs in the mail, they will pay separately for the unlimited streaming, and have to subscribe to two plans.

While the prices for multiple DVDs out at a time might be slightly lower for some customers, for the cost to keep both the DVDs and the streaming videos, everyone’s prices increased. The bottom line is this: All customers’ monthly rates, in order to keep the same service they had before, increased between two to as much as 100%, with many quoting 60% as the average increase in price. The only way someone received a lower price for their service was if they reduced the service by eliminating either the DVD portion of the plan, reducing the DVD portion of the plan, or dropping the streaming.

NETFLIX PLAN INCREASES

I had been with Netflix for about a year when the price increase email came. I took advantage of the unlimited streaming, one DVD at a time plan, and I paid $7.99 per month for this service. The email I received indicated Netflix would split my plan into two plans: $7.99 for the unlimited streaming and another $7.99 for the one DVD at a time plan, making my new total bill $15.98, a 100% increase for the same service.

The new prices are effective immediately for new customers, but will not increase immediately for existing customers.

SAME SERVICE? LICENSING ISSUES

The price increases actually come with reduced services to customers though. That is what seems to be angering the internet blog world the most right now. Based on multiple blogs, literally thousands of comments on Netflix’s blog and other news blogs about this change, customers are most upset about this one fact: Netflix increased prices but reduced services, at the same time, while trying to spin it so that it appeared the company was doing a favor to the customer.

The LA Times blog noted back in June that hundreds of Sony Licensed streaming videos suddenly, and without any warning to customers, disappeared from the queues. Netflix apparently had a contract with Starz, and more information about that can be found at the link. The contract appears to have a cap, and Netflix had exceeded that cap.

Other customers are saying in the blog and news comments that the high-definition, Blu-Ray DVD wait times are literally taking months to get sent out, and several customers are complaining that the rental DVDs are now being offered as stripped down rental versions, without many or all of the special features that the DVDs one might buy from the store have. These ‘licensed video copies’ are not the same videos Netflix used to offer, and the videos I have rented from Netflix were similar.

NETFLIX UNDER FIRE FROM HEARING IMPAIRED

Then there are the issues customers are having with Netflix’s streaming video not having closed captioning or subtitle options for the hearing impaired, though the technology for this exists and is being used by other video streaming companies, such as Hulu Plus, and even YouTube by Google is playing around with closed captioning on homemade video streaming. Customers, as evidenced in blog comments, blog posts, and comments on news articles and Netflix’s own blog, do not understand why Netflix would want to continue to alienate this significant portion of their customer base.

There are actually several petitions being supported and a boycott being called for by some bloggers to boycott Netflix until the company provides streaming video with closed captioning for the hearing impaired community. More information about this is available on the Deaf Politics Blog.

NETFLIX: THE BOTTOM LINE

Customers believe it’s important for Netflix to realize that with certain cable companies capping internet bandwidth, reducing bandwidth quality after reaching certain caps making video streaming poor; those who still live in rural areas and use dialup or even slower satellite services; and those who have to pay by how much they stream, Netflix will lose a relatively decent percentage of its customer base if renting video as a physical DVD more difficult or expensive.

Additionally, Netflix runs the risk of alienating older customers who don’t want to learn new streaming technology or who are content to pop a DVD in the player; technologically challenged customers who don’t know how to stream or use computers; and people who can’t afford internet services, broadband, or devices that allow them to stream video at a quality that can be affordable and viewable. But the DVD plan is a nice luxury that one could budget for and still have inexpensive entertainment.

The bottom line remains to be seen. It is possible that saving on postage, printing, paper and mailing costs will more than make up for the lost revenue from the customers Netflix loses or the downgraded services. Only Netflix will know if the money saved is enough to make up for the damages caused by this move.Already, it seems Netflix has seen a significant drop in stock prices, and the majority of the changes don’t kick in until September.

ALTERNATIVES TO NETFLIX

As for me, I cancelled my Netflix service the day before it was set to renew, and I have instead signed up for a free month trial at Hulu Plus. Sure, it’s all streaming with no DVDs, but after a couple of weeks on Hulu Plus, I’m seriously considering dropping my cable with Comcast completely and going 100% Hulu Plus and Amazon.com for those things that can’t be found on Hulu. For those rare moments I might want a DVD to watch, there’s always Redbox and Blockbuster'”, at least, for now. I have a feeling if the comments and discussions on blogs, social networks and news articles are any indication, others either have or will soon be following suit.

SOURCES:

Netflix Blog: “Netflix Introduces New Plan and Announces Price Changes”, Retrieved July 20, 2011

Deaf Politics Blog: “Dear Netflix, Enough is Enough”, Retrieved July 20, 2011

LA Times Blog: “Sony Movies Pulled from Netflix”, Retrieved July 20, 2011

LA Times Blog: “Redbox Will Compete with Netflix” , Retrieved July 20, 2011

LA Times: Business: “Netflix shares drop as revenue misses Wall Street’s target”, Retrieved July 21, 2011

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Comments

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17 comments to Netflix Angers, Loses Customers

  • Quinn Sumey  says:

    I read the Netflix email and I’m worried the Chief Executive Officer might start showing up outside customers’ bedroom windows blasting “In Your Eyes”.

  • Erin Ciraco  says:

    So Netflix (NFLX) is down more than 33% since company changed its customer fee plan in early July. Chief Executive Officer bonehead moves…

  • Mohammad Daddario  says:

    I find it highly ironic that the CEO of Netflix referred to AOL and Borders in his explanation of the Netflix split. Foreshadowing?

  • Omer Goldhahn  says:

    On the Netflix blog, the CEO compares Netflix to AOL & Borders, companies “great at something”. Way to associate your company with failure!

  • Del Erb  says:

    On the Netflix blog, the Chief Executive Officer compares Netflix to AOL & Borders, companies “great at something”. Way to associate your company with failure!

  • Levi Kolic  says:

    I keep getting these creepy late-night phone calls from the CEO of Netflix saying that no one else is ever going to love me like he does.

  • Grant Senne  says:

    Someone should tell the Chief Executive Officer of Netflix not to send out personal emails on company time.

  • Arturo Whichard  says:

    On the Netflix blog, the Chief Executive Officer compares Netflix to AOL & Borders, companies “great at something”. Way to associate your company with failure!

  • Rickey Leffew  says:

    So Netflix (NFLX) is down more than 33% since company changed its customer fee plan in early July. CEO bonehead moves…

  • Julian Stango  says:

    Netflix CEO message in brief: we’re putting a separate team on killing the DVD business.

  • Bobbie Lammey  says:

    So Netflix (NFLX) is down more than 33% since company changed its customer fee plan in early July. Chief Executive Officer bonehead moves…

  • Byron Vancleaf  says:

    Someone should tell the Chief Executive Officer of Netflix not to send out personal emails on company time.

  • Fausto Strawbridge  says:

    Netflix is splitting up into 2 companies. I better make room in my cardboard shelter for their CEO, since he’s going to be homeless soon.

    • Janessa  says:

      Great article, thank you again for wrtiing.

  • Cedrick Boardman  says:

    Netflix Chief Executive Officer message in brief: we’re putting a separate team on killing the DVD business.

  • Brain Caamano  says:

    I’d be so pressed & mad if I was the Chief Executive Officer or w/e of Netflix right NOW. WOOOIIIIIII.

  • Brooklyn  says:

    I know people are so outraged by the increase and I’ve even heard that over a million customers cancelled the service last month. I know I loved Netflix but now I realized they are increasing their prices by so much and removing services then it’s not worth staying with them. I found out that DISH Network has teamed with Blockbuster, they have a bunch of cool offers that are available to New and existing DISH Network customers as well as non-DISH customers. Blockbuster has the most extensive library of movies, games and TV shows and you can get thousands of On-Demand titles straight to your PC or TV! Customers will also have access to over 100,000 movies, TV shows and games by mail with new releases coming out before Netflix and Redbox. You can exchange them inside a Blockbuster store and even get Blu-Rays at no additional price. The best thing about this new offer is that you won’t find these titles on DIRECTV Cinema or Comcast on Demand and everything is combined onto one bill! I actually work at DISH Network and I’ve been wanting to tell people about this for a long time and I want everyone to check it out!

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