If Netflix is in part of your entertainment life, you probably already know that the movie streaming and DVD giant just announced that it is raising its prices by as much as 60 percent (if you keep both streaming and DVD services). You probably have already also heard the cries and whines begin as people react to the news.
It reminds me of comic Lewis Black, who said, “We live in an amazing, amazing world, and it’s wasted on the crappiest generation of spoiled idiots.” Let me explain.
When Mr. Black said that, he had just told a story to Conan O’Brian about a plane trip he had just taken. The airline was testing a then very new Wi-Fi system on the plane, and invited the passengers to check it out. In moments they’re checking email, watching YouTube, flying on a plane at 30,000 feet. Then the Wi-Fi breaks down. They guy next to him says, “Well this is bullshit!” Ha. Mr. Black points out “how quickly the world owes (this guy) something he only knew existed ten seconds ago.” Everything’s amazing and nobody’s happy. (Watch the clip here: http://www.youtube.com/watch?v=8r1CZTLk-Gk )
So how does this relate to Netflix? Well yeah, a price increase might seem sucky on their part, but however you cut it, it’s still an amazing bargain. Unlimited viewing of all content. Those of us in the industry know how much it costs to make & market a movie. Granted, Netflix has far from everything ever produced, but there is incredible diversity in their catalog—there is always something to watch (and its a great way to expand beyond your usual fare of Hollywood blockbusters). Unlimited DVDs and streaming for $16/month. After you see a few movies in the month anything you see after is gravy—basically free.
I would imagine that this price increase might help them stay in business, because as it is today their business model is not sustainable. Nor is it sustainable for the movie studios. Netflix pays a flat license fee to a studio for the right to stream a film for a year, in which time it can be viewed an unlimited number of times by all Netflix subscribers. When streaming was a new thing, the studio’s quandary was this: If they don’t sell the streaming rights to Netflix, would they sell more DVDs? Their entire fan base — tech-savvy people — is Netflix subscribers, who could now watch the movie for an unlimited number of times for free whenever they want to, which means they don’t buy the DVD. The studios had to hope that they’re selling those streaming rights to Netflix for more than they would have made in DVD sales. Well when this all got started, they definitely didn’t do that, but in the next round of negotiations Netflix is having to pay a fortune for the streaming rights, and they can’t stream the movies until three months after they’ve been on cable. All to protect the studios’ investments in their content by protecting DVD sales, cable sales, etc.
But there are a massive number of people streaming content for “free” now, at home, on smartphones & iPads. Netflix streaming accounts for almost 25% of internet traffic! Add in other streaming services (Pandora, Hulu, etc) and it comes to 43%. People love the convenience, the multiple devices, the choices.
In a word, they’re spoiled. And now Netflix raises prices because the content providers raised their prices, both entities trying to make this all work as a business model…and just watch the “crappiest generation” cry.
Its coming to a 24-hour news cycle near you.



