Why is Netflix screwing me over? A product management perspective

Netflix recently announced a 60% price hike to a popular plan that combines streaming content and DVD rentals — a plan to which I subscribe — without adding any real value to the overall service.

Once I decided whether or not I was going to stick with the combined plan or just go with streaming for $7.99/month, I got to thinking: Where is this price hike coming from? Is Netflix just covering costs or is there something greater in play?

“Deliberately creating dissatisfaction”

Eric Garland — CEO of Big Champagne — told CNET he believes Netflix is doing this to pressure the studios into licensing more streaming content:

[Netflix CEO Reed Hastings] is deliberately creating dissatisfaction.

He’s creating dissonance precisely because that title availability, those first-run titles, needs to be available more immediately and more widely as a (video on demand) or as a streamed offering. So this is a leverage play.

Netflix is wagering that if all parties are dissatisfied; if Netflix is unhappy because Netflix customers are unhappy and if Hollywood is unhappy and if everyone is unhappy then we’re going to speed the clock on new solutions.

From my own experience, it’s certainly true that I use the DVD rental as backfill for when I can’t get that same title streaming.

Does removing the legacy DVD product kill off DVDs faster, bringing industry change faster, or does it cause current customers to jump to a competing service?

Have you ever played chicken with your subscriber base against a third party for a greater cause?

Would you dare?

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5 thoughts on “Why is Netflix screwing me over? A product management perspective

  1. Apple seems to do it (play chicken with customers) and win often. Apple was the first to dump floppy disks. They also walk away from “standards” if it suits them (no Flash on iPad/iPhone, no Blueray disc support, etc…)

    I think CNET/Garland may have called this right. Netflix is big enough to matter. It may be a forcing function that causes studios to treat some forms of digital distribution in the same way they treat rental disks.

    Honestly, there is so much video content to watch currently that DOESN’T come out of Hollywood, the alternative isn’t Hollywood DVD vs. Pirated Hollywood Movie anymore. The big studios might not realize it, but they compete with Independents, TV/Cable Produced “Movies”, and even YouTube now. Not to mention the movie industries of at least a dozen competent international movie production hubs.

    I guess the lesson here might be — know what your customer considers your true competition before playing chicken…

    I think Netflix understands this. What I fear is that the big studios don’t get it. They think they’re the only game in town. They’re all living comfortably in the 20th century.

  2. For someone who really loves Netflix, it’s a hard pill to swallow. Not because of the $6 but because it’s a) unclear why they’re raising prices and b) they’re raising prices without adding value. If it helps their longterm, great for them. But in the short term, Redbox is looking a lot more appealing.

  3. I think that this is a bold move on Netflix. It is true on many levels that when everything can be provided through internet streaming that the big entrenched companies block forward progress. I am definitely disturbed that the only media choice I have chosen to enjoy is doubling it’s price for a hopeful future better service. However, if it works and results in “hollywood & company” providing just out of theater and “blockbuster” movies available by streaming, I’m for it. In my opinion, all movies, television shows, tv channels, and sports (and whatever related content that is not in my direct focus) should all be provided for through internet streaming. Cable access and local sport blackout and physical dvd rental should be out-dated media distribution by now in the mainstream market.
    After further consideration, the new cost of Netflix is not any larger than it was a decade ago renting a movie a week from Blockbuster (except that now, unlimited streaming is available to boost that weekly watching to above the 1/week quota).

  4. The writers strikes in Hollywood a few years ago was over the revenues from DVDs and streaming. What a mess that was.

    This kind of move provides an entry point for a fast follower. It looks like an upmarket move. Will the prices go back down once this game has played out? Getting movies streamed faster could have been done as a premium service.

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