Peter Kafka

Recent Posts by Peter Kafka

Netflix Tells Its Customers to Ditch Their DVDs or Pay Up

If you want to ruffle a feather at Netflix, describe the company as something other than a streaming Web video service.

Even though the majority of Netflix’s 24 million subscribers are still paying it to get DVDs by mail, Reed Hastings and company see themselves as Internet guys, not putting-discs-in-envelopes guys.

Now they’re making it even more clear, by raising the prices in a way that makes it much more expensive to get both Web streaming and DVDs from the service.

Technically, the company is continuing to sell streaming video subscriptions for $8 a month, and reducing the price of DVD-only subscriptions to $8 a month. But by eliminating an option where streaming video customers could also get discs for another $2 month, the company is effectively raising the price for its combined service by 60 percent, from $10 to $16 a month.

The changes go into effect immediately for new customers, and on September 1 for existing subscribers. Wall Street seems to think this is a good idea, and has pushed NFLX shares up since the news broke this afternoon.

(Congrats, by the way, to Engadget, for getting most of this early this morning. Journalism!)

This is a real turnaround from previous pricing plans, where Netflix sold itself as a DVD-by-mail service that gave you Web streaming for free.

Last year, the company introduced an $8-a-month, all-you-can-eat, streaming-only package, and people seem to like it, a lot.

Earlier this year, Netflix announced that a third of its new customers are choosing the Web-only option, even though doing so severely limits their choice of TV shows and movies. Netflix’s digital catalog runs around 20,000 titles, while its DVD catalog boasts more than 100,000.

But even if Netflix customers are embracing streaming, the majority of Netflix subscribers are still paying for discs, whether they use them or not. I recently discovered, for instance, that I’ve had a Netflix-owned “Battlestar Galactica” disc in my player. Which means I haven’t used it in more than a year, because Netflix started streaming the show almost exactly a year ago.

Netflix explains the rationale for the price hike in a blog post, but the short version is that it would like its DVD customers to move to the Web, or pay up. Doing so helps it cut down on discs costs and/or generate more money to help buy digital titles, which are only going to get more expensive.

I’m guessing I’ll dump the discs. I’m already inclined to start cutting back on the subscription services my family pays for, and certainly don’t want to add more. But I’ll be a little disappointed.

One of the reasons I really enjoyed Netflix was the notion that it provided instant gratification — I can stream anything they have with a click — but that it gave me the option to get even more, with a little bit of planning : Add a disc to your queue, then wait a day (or two, max), then boot up the DVD player.

I rarely took them up on the offer — see the Battlestar Galactica anecdote above. But it was nice to know it was there. And it made me feel like I was getting good value for my $10 a month. Now I’m a little less enthusiastic, and I bet I’m not the only subscriber in that boat.

*SPOILER ALERT: It turns out the Cylons are [REDACTED], or something. Frankly, I got a little confused and frustrated by the end of this thing. Still, great show!


Latest Video

View all videos »

Search »

Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work