Do you remember Netflix way back in the day? Before it was primarily a streaming service, their tiered plans revolved around how many disks a month you could order. You might also remember their marketing practices were horrible. They used misleading banner ads, hid the terms of your account billing, and made it so that no matter when in the billing cycle you canceled your account, your access was instantly shut off and you received no refunds. There goes that free month you got when you joined!
Yeah, for those of us who remember, Netflix has never actually been a, “good” company. They were innovators of at-home entertainment, but certainly no hero. The first time I registered to Netflix was in college. I didn’t want to support pirated movies and thought it was a great solution. I signed up for the three disks a month plan. I’d done the math, and realized that if I watched a disk the day it came, and subsequently shipped it out the same day, I could get more than my money’s worth of DVDs. The streaming was just a bonus! (Mostly because the content sucked.)
The playing field has changed since then though. Netflix isn’t the only streaming service out there and their growth strategy is painfully obvious. It’s no coincidence that they have been cranking out more and more Netflix Originals. My prediction for the online streaming video industry is that soon every content producer will own their own streaming service separate from the cable networks they currently work with. Movie studios will have their own streaming services too! And of course, there will be one company getting rich by creating these video streaming platforms for the major studios. Those companies providing the software will be key in allowing packaged streaming services, you might recall the phrase “bundling” from old cable and satellite TV ads…
Netflix can’t survive on leasing their content. They know that, and they need to be content owners to move forward. It’s also more profitable since by owning the content they have more control over how it’s used, how it’s promoted, and they don’t have to share a cut of their earnings with anyone else.
So why should Netflix be worried? Because before that magical day of bundled streaming services, they will have to balance a full offering of leased content as well as create as many Netflix Originals as they can. It’s an expensive and painful transition that has likely been the reason for their recent price hike. Those doing the math realize that Netflix is quickly losing the pricing game with streaming video. At the new price point of $9.99 per month, Netflix is officially MORE EXPENSIVE than Amazon Prime. (If you have been living under a rock and haven’t realized that Amazon Prime offers a streaming service check out a previous post where I talk about all the Prime benefits.) That’s right. It’s now $119.88 per year for Netflix, and Netflix doesn’t offer and other perks.
I realize that Netflix is between a rock and a hard place, but I don’t think raising their prices will benefit them in the long run. They are betting all their chips on their Netflix Original content to be good enough to merit the increase, but I imagine we will see more than a handful of people dropping their subscriptions and looking for cheaper alternatives.
UPDATE: Amazon has announced that they will be offering a monthly option for their streaming service as a stand alone product. They are gunning for Netflix directly now! They will also be offering add-on subscriptions for services like HBO, Stars, and Showtime. Your move Netflix.