Sunday, October 30, 2011

Netflix Will Stream Along


First Netflix, now RedBox is increasing the price of DVD rentals. One hypothesis would be that there are fewer customers for DVDs, requiring a price increase to keep the business going. If customers are not moving away from movies all together, but rather switching to alternative ways of getting entertainment on demand, then Netflix is on the right path. 

Netflix's business model switch was too painful to watch - poor external communications, bold consumer reaction to pricing, inconsistent offerings...But they will survive this ordeal - because they are aligned with the future of TV and more broadly, entertainment. They are regarded as a value add to cable services. They give people reasons to enjoy their flat screens. And early adopters, especially among younger viewers, are streaming on demand. 

Those who focus on the number of customers leaving Netflix are acting on incomplete data. How profitable were those customers who complained and dropped off? Did they order one or 10 movies a week, paying the same subscription fee? If they were infrequent users, how easily would they switch to a streaming service?If they were hyper users, are they more likely to stream or wait for the DVD in the mail?These questions need answers, before we make final claims.  

The death of qwickster was a distraction. Netflix has some patching to do to mend its reputation. With the right content library and distribution strategy, it can survive. 

Posted via email from dotwom's posterous

1 comment:

Shaun said...

Redbox implemented the 20% increase, but the difference between the two at least from what I have gathered reading articles on it, is more along the line of the price of debit card transactions going from 6 cents on the dollar to 23 cents a dollar. Which is that is true then it explains the increase right there due to a change in the business platform. Netflix increase wasn't due to a business need right now, it was a business need in the future to get more streaming and more movies they need revenue, and they put the their customer to the fire to get it. I rented 6-8 movies a month when I was on netflix, and streamed a bit as well. I also wasn't going to pay 60% more to do both, and I figured that I could live without streaming, and renting so many movies. After all Redbox was $1, and it was a good impulse buy after eating a greasy burger at McDonald's. Then I looked at the last couple months, since I removed streaming, I was renting 14 movie's a month, almost as much as Netflix new pricing, and that wasn't including gas, and the greasy burger. I didn't want to go back to Netflix, I don't think that they thought about their customers at all during that, showing them all a lack of respect, and for that lack of respect they don't deserve my business. Redbox with the increase in price I would be adding another $2.80 a month onto those 14 rentals. Working at DISH I of course knew about the Blockbuster movie pass for $10 a month, so I decided to give it a go, and the first 3 months are free. $10.00 a month after that, I get dvd/blu-ray by mail (nothing extra for blu-ray), 20 additional movie channels on my DISH receiver, and streaming to the television and computer. I think this is one of the best alternatives for DISH customer to the increase of Netflix, and Redbox, at least for frequent renters.